Clipper Logistics plc Annual Report 2014

Plain-text annual report

Clipper Logistics plc Annual Report and Accounts 2014 1 Clipper Logistics plc Annual Report and Accounts 2014 2 Contents Strategic Report Who We Are At a Glance Group Structure 2014 Highlights Our Business Model Our Key Strengths Segmental Highlights Chairman’s Statement Operational and Financial Review Risk Management Corporate Social Responsibility Governance Board of Directors and Senior Management Corporate Governance Report Nomination Committee Report Audit Committee Report Directors’ Remuneration Report - Directors’ Remuneration Policy - Implementation Report on Remuneration Directors’ Report Statement of Directors’ Responsibilities in respect of the Group Financial Statements Group Financial Statements Independent Auditor’s Report - Group Group Income Statement and Statement of Comprehensive Income Group Statement of Financial Position Group Statement of Changes in Equity Group Statement of Cash Flows Notes to the Group Financial Statements Company Financial Statements Statement of Directors’ Responsibilities in respect of the Company Financial Statements Independent Auditor’s Report - Company Company Balance Sheet Notes to the Company Balance Sheet Directors and Advisors 4 7 8 9 10 13 14 15 16 18 26 28 30 32 34 38 40 44 48 60 66 70 72 74 76 77 78 80 82 126 128 129 130 131 141 3 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Annual Report and Accounts 2014 Strategic Report 4 5 Clipper Logistics plc Annual Report and Accounts 2014 6 Strategic Report | Governance | Financial Statements Who We Are Clipper is a retail logistics specialist, which provides value-added, consultancy-led services to its blue chip client base. Clipper is a UK leader in its markets, with a long-standing customer base in: - e-fulﬁ lment - fashion - high-value logistics A proﬁ table and cash generative commercial vehicles business complements the Group’s logistics activities. 7 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Annual Report and Accounts 2014 At a Glance The Group is a retail logistics specialist, providing value- added services to its blue chip customer base. It is a UK market leader in e-commerce (including e-fulﬁ lment and returns management), fashion, and high value logistics. A consultancy-led approach is taken with both existing and prospective clients to develop innovative solutions. A platform has been established in Germany to enable the Group to beneﬁ t from anticipated future growth in European online retailing, and support the ambitions of UK customers who plan to expand into Europe. A proﬁ table and cash generative commercial vehicles business complements the Group’s logistics activities. The Group operates from 38 locations comprising over 5 million square feet. It now has over 2,500 employees, excluding agency staff. The Group operates from 38 locations comprising over 5 million sq. ft. and now has over 2,500 employees 8 Strategic Report | Governance | Financial Statements Group Structure Composition of the Group Reporting Segments Clipper Logistics plc (“Clipper” or the The results of the Group are reported “Company”) provides value-added logistics in the following segments: services in the UK. - Value-added logistics services, comprising: The Company has the following wholly - E-fulﬁ lment logistics, including returns owned subsidiaries: management services; - Clipper Geist Logistics GmbH & Co. - Non e-fulﬁ lment logistics, including KG, which provides logistics services in the results of the Group’s German Germany; operations; - Northern Commercials (Mirﬁ eld) Ltd - Central logistics overheads, being those (“Northern Commercials”), which is a costs of the business which are not commercial vehicle operation; and allocable in a meaningful way to the - Genesis Specialised Product Packing Ltd above operating segments, including (“Genesis”), which provides an eBay store directorate, advertising and promotion, offering to enable Clipper to assist its retail accounting and IT, and the solutions customers with the sale of excess stock. development team; The above entities, along with a number of - Commercial vehicles; and dormant subsidiaries, comprise the “Group”. - Head ofﬁ ce costs, representing the costs of the Chairman, CFO, Non-Executive Directors and plc compliance costs. Restructure ahead of IPO Prior to the ﬂ otation of Clipper Logistics plc on the London Stock Exchange, it and its former parent company, Clipper Group Holdings Ltd, undertook a restructuring exercise in preparation for the IPO. The key elements of this restructuring were as follows: - Clipper Logistics plc formerly traded as Clipper Logistics Group Ltd, and was a wholly owned subsidiary of Clipper Group Holdings Ltd; - In April 2014, Clipper Logistics Group Ltd acquired its fellow subsidiaries from Clipper Group Holdings Ltd which comprised 100 per cent of the issued share capital of Northern Commercials (Mirﬁ eld) Ltd and Genesis Specialised Product Packing Ltd, and 75% of Clipper Geist Logistics GmbH & Co. KG; with the remaining 25% being acquired from the minority shareholder, also in April; - On 15 May 2014, Clipper Logistics Group Ltd was re-registered as a public limited company, with the name Clipper Logistics plc. 9 Clipper Logistics plc Annual Report and Accounts 2014 2014 Highlights Operational Highlights for the Year to 30 April 2014: - Signiﬁ cant new contracts with customers including SuperGroup, ASOS and Antler; - Strong growth in retail e-commerce market driving revenues with existing customers, as well as providing opportunities for new contract wins; - New “Boomerang” brand introduced to focus on value-added returns management services; - Acquisition of R. Geist Spedition GmbH & Co. KG completed in October 2013 to enhance operations in Germany, providing a platform to beneﬁ t from growth in European online retailing and support UK customers’ ambitions to expand into Europe; and - Integration of Northern Commercials (Mirﬁ eld) Ltd and Stormont Truck and Van Ltd in August 2013 realised cost reductions and created a platform for market share and proﬁ t growth Post Year End Highlights: - Clipper Logistics plc admitted to the premium segment of the London Stock Exchange on 4 June 2014; and - Strong business pipeline ensures organic growth within the value-added logistics services division will continue into the 2015 ﬁ nancial year. 10 Strategic Report | Governance | Financial Statements 2014 Highlights continued 2014 Financial Highlights: Group revenue increased by 25.2% to £201.2m Statutory Group proﬁ t for the period £2.8m (2013: £3.8m), after deduction of discontinuing costs of £2.3m (2013: £2.1m) and exceptional costs of £2.5m (2013: £0.4m) Group Adjusted EBIT1 increased by 10.0% to £9.6m Adjusted EBIT from e-fulﬁ lment logistics operations up 49.4% to £3.7m due to new contract wins and existing customer growth Non e-fulﬁ lment logistics Adjusted EBIT up 15.8% to £9.2m Investment in additional central logistics overheads of £1.8m to further support growth into 2015 Commercial vehicles Adjusted EBIT up 25.4% to £1.8m due to business integration and depot rationalisation Adjusted earnings per share2 increased to 6.6p (2013: 5.7p) A new £30m bank debt facility was put in place at IPO to facilitate targeted acquisition strategy 1 Adjusted EBIT is deﬁ ned as operating proﬁ t excluding discontinuing and exceptional costs. 2 Adjusted earnings per share is based on proﬁ t attributable to ordinary equity holders adjusted by adding back discontinuing and exceptional costs, and adjusting for the tax thereon. 11 Clipper Logistics plc Annual Report and Accounts 2014 12 Strategic Report | Governance | Financial Statements Our Business Model Value-added Logistics Services 65% of the UK logistics division’s revenue in Commercial Vehicles Clipper focuses on the provision of the year to 30 April 2014 was on open book The commercial vehicles business operates consultancy-led, value-added logistics contract terms. Under the terms of these Iveco and Fiat franchises. It sells new and services. It works closely with existing contracts, all costs incurred in providing used vehicles, provides servicing and repair and prospective clients to develop services (people, property, plant and facilities, and sells parts. tailored solutions to meet their speciﬁ c equipment, packaging, etc) are recharged logistics needs. to customers together with a management Whilst revenues from new vehicle sales can fee. The contract mechanisms provide vary due to wider economic conditions, The Company is focused on the fashion Clipper’s customer base with total margins on new vehicle sales tend to be and non-food retail sectors, and provides transparency, and make for solid long- relatively low. Margins on aftersales activities services under formalised contractual term relationships with clients, whilst (i.e. servicing and parts) are much higher, arrangements to a major blue chip protecting Clipper from cost inﬂ ation, mix so that in the year to 30 April 2014, whilst customer base including SuperGroup, changes and, largely, volume downsides, aftersales activities accounted for 41% of The John Lewis Partnership, ASOS, Asda, whilst allowing the Company to beneﬁ t revenue, they accounted for 91% of gross Morrisons, and Tesco. from increasing activity levels. Gainshare proﬁ t generation (gross proﬁ t after directly mechanisms and KPI-based incentives also attributable costs). Its market-leading position in providing allow Clipper to enhance proﬁ ts, through solutions in the e-commerce sector, innovation and excelling in service delivery. Since most commercial vehicles are including returns management, places the required by law to be inspected every six Company in a strategically strong position 14% of the UK logistics division’s revenue in weeks, this gives rise to stable proﬁ t and given the structural changes taking place the year to 30 April 2014 was derived from cash streams from this part of the Group. in retailing, with the increasing proportion minimum volume guarantee contracts, of retail sales represented by online sales, which protect Clipper from volume and the move to multi-channel and downsides, whilst allowing the Company to omni-channel retail distribution models. beneﬁ t from growing activity levels. Further, credibility gained in the provision Thus, the business model within the logistics of logistics services in relation to high value division in the UK provides a high degree products represents a real barrier to entry to of proﬁ t resilience, with just 21% of revenue this segment of the market. derived from more traditional, closed book arrangements. The Company’s focus on the retail sector ensures that it is able to offer best-practice, In Germany, all business is currently lowest-cost services to its blue chip conducted on closed-book terms, although customer base. it is anticipated that as e-commerce activities develop these are likely to be on open book terms as such arrangements are mutually beneﬁ cial for both the retailer and the Group. 79% of the UK logistics division’s revenue in the year to 30 April 2014 was derived from open book or minimum volume guarantee contracts 13 Clipper Logistics plc Annual Report and Accounts 2014 Our Key Strengths 1 Highly attractive exposure to online retail 3 Long-standing, blue chip and growing 6 Clear growth strategy The penetration of e-based sales in the customer base The Group has a very clear strategy UK is one of the highest in the world. The The Group has a wide portfolio of blue chip for future growth. This includes: trend towards a greater proportion of retail customers both in the UK and Germany, - Continued organic expansion of the activity being conducted online is expected many of whom have been clients for customer base; to continue; research indicates that by many years. 2022 one-third of all sales in the UK will be conducted online. 4 High degree of contractual certainty Returns management is expected to underpins ﬁ nancial predictability and become the “battle-ground for competitive stability advantage” amongst retailers, with returns Substantially the whole of the Group’s in the UK averaging between 25%-40%. UK logistics business is subject to formal Clipper has introduced a new brand, contractual arrangements. For the year “Boomerang”, to capitalise upon this to 30 April 2014, 79% of revenue from UK opportunity, leveraging from its already logistics’ customers was on open book market leading proposition in online or minimum volume guarantee terms, fulﬁ lment. providing a high degree of proﬁ t and cashﬂ ow certainty, and protection against cost inﬂ ation, mix changes and, largely, 2 Innovative retail specialist volume downsides. As a retail specialist, Clipper is a UK market leader in fashion and non-food multichannel logistics. 5 Real barriers to change The specialised nature of the services The Group has a track record of provided by Clipper, particularly in the innovation, including the development of: e-commerce and high value product - Consolidation centres, where products sectors, represents real barriers to change, destined for multiple retail outlets are as evidenced by the high levels of customer consolidated, before being delivered retention experienced by the Group. to the destination. Examples include Meadowhall Shopping Centre in Many implementation projects involve Shefﬁ eld and Regent Street in London; the development of bespoke software, integration and other solutions, resulting in Clipper playing a central role in the delivery of the retailer’s customer proposition. - Port deconsolidation supply chain models, where facilities are located near a port of entry for deconsolidation and onward distribution through the supply chain; and - The ‘Boomerang’ brand for returns management; Clipper operates a consultancy-led business model, targeting value-added beneﬁ ts for its customers. Strategic-level discussions focused on providing solutions to particular challenges ensure that Clipper is central to its clients’ strategies. 14 - European expansion – the acquisitions of the Beständig group of companies in 2008 together with the more recent acquisition of R. Geist Spedition GmbH & Co. KG in October 2013, have created a platform in Germany from which the aspirations of both German retailers to move online, and UK retailers to expand into continental Europe, can be supported; - Innovative retail solutions, including for example returns management services, which is expected to be a fast-growing area of retail activity. The Boomerang returns solutions brand was introduced in the 2014 ﬁ nancial year to capitalise on the opportunities presented to the Group in assisting retailers to deal with this challenging logistical issue; and - Considering potential acquisitions which are complementary to the Group’s activities. 7 Complementary commercial vehicles business Northern Commercials has over 1,700 customers and is not heavily dependent on the logistics division of the Group. Its proﬁ tability is driven by high-margin aftersales activity, which is underpinned by legal requirements governing the inspection of commercial vehicles. Northern Commercials provides Clipper with ﬂ exibility over ﬂ eet procurement, and margins on servicing activity are retained within the Group. The business is robustly proﬁ table and cash generative. Strategic Report | Governance | Financial Statements Segmental Highlights E-fulﬁ lment operations Within this sector Clipper handles high value E-fulﬁ lment operations include the receipt, products, including tobacco, alcohol and warehousing, stock management, picking, high value clothing, and also undertakes packing and despatch of products on traditional retail support services including behalf of customers to support their online processing, storage and distribution of trading activities, as well as a range of products, particularly fashion, to high street ancillary support services. retailers. At no time does Clipper take ownership of customers’ products. The Company Central logistics overheads has recently introduced a new brand, Central logistics overheads are the costs ‘Boomerang’, under which returns of of support services speciﬁ c to the value- products sold online are managed on added logistics services segment, but behalf of retailers. which are impractical to allocate between the sub-segment activities. Clipper expects to continue to experience rapid growth in this segment reﬂ ecting continuing migration to online retailing due Commercial vehicles to the structural changes taking place in The commercial vehicle business, Northern the retail sector. Commercials, operates Iveco and Fiat commercial vehicle dealerships from six locations, together with three Non e-fulﬁ lment operations sub-dealerships. It sells new and used Non e-fulﬁ lment operations include receipt, vehicles, provides servicing and repair warehousing, stock management, picking facilities, and sells parts. Vehicles sold and and distribution of products on behalf of serviced range from small light commercial customers. Clipper does not take ownership vans, through to articulated tractor units. of customers’ products at any time. Segmental Highlights: Year to 30 April 2014 £m Year to 30 April 2013 £m % Change E-fulﬁ lment logistics revenue E-fulﬁ lment logistics Adjusted EBIT Non e-fulﬁ lment logistics revenue Non e-fulﬁ lment logistics Adjusted EBIT Central logistics Adjusted EBIT Total logistics revenue Total logistics Adjusted EBIT Commercial vehicles revenue Commercial vehicles Adjusted EBIT 46.0 3.7 89.6 9.2 (4.2) 135.6 8.7 66.8 1.8 29.6 +55.5% 2.5 + 49.4% 69.3 + 29.3% 7.9 (2.4) 98.9 8.0 62.9 1.4 +15.8% +37.1% +8.3% +6.1% +25.4% Adjusted EBIT as shown above excludes discontinuing and exceptional costs. Percentages are calculated based on the underlying numbers as presented in the Financial Statements, not on the rounded ﬁ gures in the table above. 15 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Annual Report and Accounts 2014 Chairman’s Statement Steve Parkin, Executive Chairman I am pleased to write as Chairman of Clipper Logistics plc following the successful Initial Public Offering on the London Stock Exchange in June 2014. The demand for the listing was high, and we are delighted to attract blue chip institutional and retail investors as shareholders. The business is growing through our ability to demonstrate real value-add services for our large client base and we are conﬁ dent of maintaining this level of momentum. The Group has seen a strong performance throughout the year under review with a number of high proﬁ le new contracts being signed including major brands such as SuperGroup, Tesco and ASOS. Our desire to constantly identify new methods and technology that ease the operational burdens of our clients is the driving force behind the business. The Group’s unrivalled understanding of the e-fulﬁ lment and returns market, along with the ever-evolving needs of customers in these areas will ensure we retain and expand our market share. Clipper is rightfully excited about the years to come and is proud of the quality of service it continues to provide. 16 Strategic Report | Governance | Financial Statements Group revenues increased by 25.2% to £201.2 million for the year to 30 April 2014 Group Adjusted EBIT* increased by 10.0% to £9.6 million for the year to 30 April 2014 Chairman’s Statement continued Results Governance Group revenues increased by 25.2% to Following its IPO, the Group is proud of its £201.2 million for the year to 30 April 2014, commitment to high levels of corporate and Group Adjusted EBIT increased by governance as a listed company. 10.0% to £9.6 million, in line with the proﬁ t Alongside the executive management estimate included in the IPO Prospectus. team of Tony Mannix (CEO), David Hodkin Continued strong cash generation enabled beneﬁ ts from the combined experience of the Group to pay a dividend of £6.3 million its Non-Executive Directors: Paul Hampden (CFO) and Sean Fahey (CIO) the Company during the year. Smith (Senior Independent Non-Executive Director), Stephen Robertson, Ron Series We anticipate paying circa 40-60% of after and Mike Russell. tax proﬁ ts as dividends going forward, given the strong cash proﬁ le of the business. People and Board Look ahead The Group is in an enviable position; being amongst the leading providers of Clipper Logistics plc is led by an excellent value-added and e-fulﬁ lment solutions to management team that has been at the the retail sector in the UK, the business is core of the business for many years. growing in line with its strategy and is poised for further growth in the medium term, Having guided the Group through periods both in the UK and internationally. of signiﬁ cant change in the UK retail industry, the management team’s proven I look forward to working with all of the ability to continue to steer the business Group’s stakeholders as we continue to along its path of organic growth through deliver on the next phase of the business’s customer focus, technical innovation development. and growing brand awareness is well established. I would like to take this opportunity to thank all the employees of the Group for their commitment and contribution to the Group’s performance. *Adjusted EBIT is deﬁ ned as operating proﬁ t excluding discontinuing and exceptional costs. 17 Clipper Logistics plc Annual Report and Accounts 2014 Operational and Financial Review 1. Overview of results We have reported additional The Group made excellent progress all business areas including e-fulﬁ lment comparatives in the Group Financial in the ﬁ nancial year to 30 April 2014. logistics, non e-fulﬁ lment logistics and Statements as required for a ﬁ rst time commercial vehicles, as demonstrated adopter of IFRS, but the following Group revenues increased by 25.2% to by the following table: comments focus only on the results for the £201.2 million, with strong growth in year to 30 April 2014 and, where relevant, to the ﬁ rst year of comparatives. 18 Revenue E-fulﬁ lment logistics Non e-fulﬁ lment logistics Total logistics Commercial vehicles Inter-segment sales Year to 30 April 2014 £m Year to 30 April 2013 £m 46.0 89.6 135.6 66.8 (1.2) 29.6 69.3 98.9 62.9 (1.1) % change +55.5% +29.3% +37.1% +6.1% Group revenue 201.2 160.7 +25.2% Percentages are calculated based on the underlying numbers as presented in the Financial Statements, not on the rounded ﬁ gures in the table above. Within the logistics segment, Revenue growth in commercial vehicles the Group beneﬁ ted from: was driven by: - the full-year impact of contract wins - an increase in the volume of new vehicle secured in the previous ﬁ nancial year sales, with sales of 2,447 units, compared including, amongst others, Wilkinsons, to 1,782 in the year to 30 April 2013; and American Golf, Claire’s Accessories, Hobbycraft and Morrisons Nutmeg; - a modest increase in after-sales revenues. - organic growth on existing contracts, including Tesco, Asda, The John Lewis Partnership, New Look, Sainsbury’s, and Morrisons transport; and - the part-year impact of contracts won during the year to 30 April 2014, including ASOS, SuperGroup and Antler, as well as a range of other new contract wins. The full year beneﬁ t of these contracts will be realised in the year to 30 April 2015, together with the part-year beneﬁ ts of contracts currently in the pipeline and due to go live during the remainder of calendar year 2014 and early calendar year 2015. Strategic Report | Governance | Financial Statements Operational and Financial Review continued Group Adjusted EBIT project delivery and senior management The Group also grew Adjusted EBIT strongly resource in order to deliver signiﬁ cant in all segments, and invested in additional organic growth into the future: Group Adjusted EBIT E-fulﬁ lment logistics Non e-fulﬁ lment logistics Central logistics overheads Total logistics Commercial vehicles Head ofﬁ ce costs Group Adjusted EBIT Year to 30 April 2014 £m Year to 30 April 2013 £m % change +49.4% +15.8% +8.3% +25.4% 2.5 7.9 (2.4) 8.0 1.4 (0.7) 8.7 +10.0% 3.7 9.2 (4.2) 8.7 1.8 (0.9) 9.6 Group Adjusted EBIT is deﬁ ned as Group operating proﬁ t excluding discontinuing and exceptional costs. Percentages are calculated based on the underlying numbers as presented in the Financial Statements, not on the rounded ﬁ gures in the table above. Group Adjusted EBIT increased by 10.0% Similarly, revenue derived from minimum Within this sector the Group handles to £9.6 million in the year to 30 April 2014, volume guarantee contracts is ﬁ xed at a high value products, including tobacco, and the Group is well placed to achieve minimum level, so that a shortfall in activity alcohol and high value clothing, and further EBIT growth in the coming ﬁ nancial levels would give rise to a lower cost base, also undertakes traditional retail support year due to the full year beneﬁ ts of recent and a higher reported margin. services including processing, storage and contract wins, coupled with a very strong distribution of products, particularly fashion, new business pipeline. Accordingly, Adjusted EBIT is a more to high street retailers. relevant measure of ﬁ nancial performance. Adjusted EBIT is the core metric by which Central logistics overheads include the the management team assesses corporate E-fulﬁ lment operations include the receipt, costs of the Directors of the logistics performance, as the high proportion warehousing, stock management, picking, business, the project delivery and IT support of open book and minimum volume packing and despatch of products on teams, sales and marketing, accounting guarantee contracts within the UK logistics behalf of customers to support their online and ﬁ nance, and human resources, that division distorts reported margins. trading activities, as well as a range of cannot be allocated in a meaningful way ancillary support services. to business units and segments. We invested This is due to an element of management signiﬁ cantly in such resources during the fees on certain contracts being ﬁ xed in the The Company has recently introduced year, particularly in operational support, and short term, so that an increase in revenue a new brand, ‘Boomerang’, under solution design and implementation, in view in periods of increased activity will not which returns of products sold online of the very high levels of organic growth necessarily give rise to a proportionate are managed on behalf of retailers. being experienced by the business. increase in proﬁ t, resulting in lower reported margins. Conversely in periods of reduced Non e-fulﬁ lment operations include receipt, activity levels, reported margins would warehousing, picking and distribution of typically increase. products on behalf of customers. 19 Operational and Financial Review continued Whilst some additional infrastructure will Of the exceptional costs of £2,516,000 inevitably be required as the business charged to proﬁ t and loss in the year to 30 continues to grow, the investment in central April 2014, £1,981,000 related to the costs logistics overheads will be of more modest of the IPO. The balance related to depot proportions. closure costs (£363,000), redundancy costs on reorganisation (£162,000), and aborted The commercial vehicle business, Northern contract exit costs (£10,000). Commercials (Mirﬁ eld) Ltd, operates Iveco and Fiat commercial vehicle dealerships from six locations, together with three sub- Net interest charges dealerships. It sells new and used vehicles, Net interest charges for the year to 30 provides servicing and repair facilities, and April 2014 were £851,000, a reduction of sells parts. Vehicles sold and serviced range £151,000 from the £1,002,000 incurred from small light commercial vans, through in the previous year, reﬂ ecting the cash to articulated tractor units. generative nature of the Group’s operations. Head ofﬁ ce costs represent the cost of the Executive Chairman, Chief Financial Taxation Ofﬁ cer, Non-Executive Directors and plc The effective rate of taxation of 27.9% compliance costs. (2013: 27.5%) is higher than the standard rate of corporation tax of 22.84% (2013: The proﬁ t after tax for the year to 30 April 23.92%) principally due to the relatively high 2014 was £2,846,000 (2013: £3,774,000), proportion of expenditure disallowable for tax as set out on page 76. This is stated after purposes. As the discontinuing head ofﬁ ce charging £2,297,000 (2013: £2,137,000) costs include some disallowable items such of discontinuing costs, and £2,516,000 as customer entertaining and sponsorship, (2013: £392,000) of exceptional costs. the effective rate of tax is expected to reduce in the year ended 30 April 2015. As such, adjusted proﬁ t after tax for the year to 30 April 2014 (which excludes the discontinuing costs, exceptional costs Earnings per share and the tax associated with those costs, As set out in note 22 to the Financial and which the Board believes is therefore Statements, during the year to 30 April 2014 a more meaningful measure of the there was a group reorganisation involving performance of the Group) was both an issue and a subdivision of shares. £6,540,000 (2013: £5,690,000). In addition, there was a large amount of The discontinuing costs relate to remuneration non-recurring costs. Consequently, the basic of a retiring director, consultancy and measure of earnings per share is signiﬁ cantly professional fees in respect of potential distorted by these factors. Adjusting earnings investment opportunity appraisals, the to exclude discontinuing and exceptional costs of operating the Chairman’s private costs and the tax effect thereon, gives ofﬁ ce, and certain advertising, sponsorship adjusted earnings of £6,540,000 for the year and entertaining expenditure which will to 30 April 2014 (2013: £5,690,000). not be borne by the Group post-Admission (“Admission” being deﬁ ned as 4 June 2014, the date on which Clipper Logistics plc was admitted to the premium segment of the London Stock Exchange). 20 Strategic Report | Governance | Financial Statements Operational and Financial Review continued Adjusted earnings per share were Cash ﬂ ow Net debt 6.6 pence for the year to 30 April 2014 The Group reorganisation undertaken as As shown in note 20 to the Financial (2013: 5.7 pence). part of the preparation for the IPO outlined Statements, the Group’s net external debt On an unadjusted basis, earnings per share reported cashﬂ ows, due to the continued £3,860,000 (2013: £2,683,000). At the were 2.8 pence (2013: 3.8 pence). existence of balances due to and from the same time, the net balance owing to the above, has caused some distortion in at 30 April 2014, on a statutory basis, was Group’s former parent company, Clipper former parent company was £14,181,000 Group Holdings Ltd. From the new ﬁ nancial (2013: £2,335,000). Capital expenditure year onwards, such distortions will not Of total capital expenditure of £5,139,000 continue. (2013: £5,615,000), £3,135,000 (2013: On 2 May 2014, bank and hedging facility agreements which had been entered £4,196,000) related to new logistics Net cash ﬂ ow from operating activities was into by the former parent company were contracts or increases in capacity; £11,617,000 (2013: £8,084,000). Prior to novated to the Company. Subsequent £1,771,000 (2013: £1,420,000) was to the reorganisation of the Group, dividends to this, the Group’s banking facilities were replace or maintain existing assets and totalling £6,349,000 (2013: £2,800,000) restructured, effective from the date of £233,000 (2013: £nil) related to business were paid to the former parent company. Admission. combinations (see note 28). The Group’s business model gives rise to If the novation and restructuring of the high levels of cash generation. In the UK former group’s bank facilities had occurred logistics business, Clipper is typically paid in at 30 April 2014, and balances with the the month in which services are delivered former parent company settled, the on open book and minimum volume Group’s net debt would have changed guarantee contracts, giving rise to a typically as in the table below. negative investment in working capital, whilst in the commercial vehicles business working capital is substantially funded by the manufacturer through stocking facilities for new vehicles, and trade credit terms for parts supplied. Group net debt as at 30 April 2014 Actual Group net debt per note 20 to the Financial Statements New bank loans Repayment to former parent company Receipt from former parent company Cash & cash equivalents £’000 Current borrowings £’000 Non-current borrowings £’000 Net debt £’000 5,360 12,500 (15,267) 1,086 (4,960) (2,500) - - (4,260) (3,860) (10,000) - - Adjusted net debt 3,679 (7,460) (14,260) (18,041) 21 Clipper Logistics plc Annual Report and Accounts 2014 Operational and Financial Review continued 2. Logistics division Market overview, size and growth Online sales in the UK are predicted to grow Omni-channel represents the latest of market and market trends to £125 billion in 2022, by which point one evolution of multichannel retailing, whereby Traditional bricks and mortar retail still third of sales in the UK are forecast to be retailers offer consumers ﬂ exibility not only on constitutes the majority of retail sales in the conducted online. UK. However, the growth of online retailing and the desire for major retail brands to the method of order placement (as is the case with multichannel) but also in respect of the choice of delivery destination – for have as many different touch points with Structural growth in online, example, the consumer might place an their customers as possible means that multichannel retailing order online and choose to have the order multichannel retailing will be a dynamic The UK has one of the highest rates of delivered to that retailer’s high street store, driver of change for both the retail and internet and smartphone penetration in or at a ‘click and collect’ site in a third party logistics markets in the near future. An Western Europe and this level of penetration location, rather than their home address. increasing number of distribution channels is expected to increase further in coming This development adds even greater are now required to meet the demands of years. The proportion of online sales as a complexities to the logistical requirements the consumer, including shopping at stores, percentage of total retail sales in the UK of retailers. home delivery, click and collect as well is already one of the highest in the world. as the return of purchased items. The fact that the penetration of internet-based sales This trend is fundamentally altering the Returns management demands of retailers in the UK economy is one of the highest logistical requirements of retailers, who increasingly complex in the world leads the Directors to believe must meet the challenges of multichannel Returns management is an increasingly that the UK is at the forefront of the logistics retailing (whereby customers place important area for retailers. It is estimated challenges being posed to retailers by the orders across a variety of sales channels, that 25% to 40% of all clothing and growth in online retail. for example retail stores, online stores, footwear purchases in the UK are returned. mobile stores and telephone sales), which Historically, customers would return the The retail sector is undergoing structural demands complex warehousing, order product to the store where the purchase changes, and as a market leader in processing and stock management systems was made, but as online retail has the provision of services to support in order to deliver a high quality service to developed, customers are demanding retailers’ online and returns management consumers. Further, non-food retailers are choice in their method of return, for challenges, the Group is strategically well expected to invest approximately £5 billion example posting the product back to the placed to capitalise on the very signiﬁ cant in making the transition from multichannel retailer, or taking it into a high street store or growth expected in this sector of the market. to “omni-channel” retailing over the next a collection point. According to market research, the UK’s e-commerce market has grown from £0.8 billion in 2000 to £78 billion in 2012 (£62.4 billion excluding travel) and is set to reach £107 billion in 2014 (17% annual increase) with double-digit growth forecast until around 2017. The online retail market continued to see steady growth in February 2014, recording a 14.3% year on year increase. ﬁ ve years. The UK’s e-commerce market has grown from £0.8 billion in 2000 to £78 billion in 2012 Retailers are becoming increasingly concerned to ensure that returns management is handled effectively so that their brands are not damaged by customers using social media. In addition, rectiﬁ cation during the returns management process can add value and enhance margin for the retailer. 22 Strategic Report | Governance | Financial Statements Operational and Financial Review continued This represents a stock management and Revenues from e-fulﬁ lment activities, Revenue from non e-fulﬁ lment operations processing challenge for retailers, since including returns management, increased grew by 29.3% for the year ended 30 April traditional warehouses have been designed by 55.5% from £29.6 million for the year to 2014, from £69.3 million to £89.6 million, to receive and process large quantities of 30 April 2013 to £46.0 million for the year to with Adjusted EBIT increasing by 15.8%, from identical product, rather than to receive 30 April 2014. We are particularly pleased £7.9 million to £9.2 million. Future growth individual units of product. Equally, such with this performance, as our strategy has in more traditional, value-added logistics returned units will inevitably require some been to become a market leader in the services remains central to our future strategy degree of inspection, rectiﬁ cation, cleaning e-commerce sector, and to be a thought too, and we were pleased to welcome or repair before going back into available leader in the provision of value-added SuperGroup, Hobbycraft, and Antler, stock, or may even be deemed unﬁ t for services across the sector. amongst others, to Clipper during the year. prime sale. Returns can in addition lead to signiﬁ cant levels of working capital tied up To address the latest challenges imposed in stock. on retailers by returns management as Retail consolidation centres outlined above, Clipper has successfully Clipper is a market leader in retail Retailers therefore need to rework the introduced the “Boomerang” brand and consolidation centres, which allow multiple product into a saleable state very quickly concept during the year, and we are deliveries to be made to retail outlets from a to reduce working capital investment and particularly pleased to welcome ASOS as single, localised centre, providing beneﬁ ts in: maintain margins. The Group has a strong the ﬁ rst new customer using those services. - retail space availability, as the need track record of managing this process for customers, including managing the returns for on-site stock rooms is obviated; - a wider range of stock being available operation for ASOS, the UK’s leading online Non e-fulﬁ lment logistics is central to the end customer; and fashion retailer. to our future strategy too - reduced emissions, of increasing The Group will continue to develop importance in city centres in particular Further, the power of social media and and deliver truly value-added services consumer review websites enhances the to address the needs of retailers in more importance of returns management as the traditional areas of logistics services, returns experience represents the ﬁ nal touch including receipt of inbound product, point between a retailer and the consumer storage, store-readiness of product, – a badly handled customer experience and distribution to retail destinations. in respect of the returns process may be quickly communicated by that customer The Group will continue to innovate to a large number of people, particularly to deliver best in class solutions for its via social media, which has the potential to customers. harm a retailer’s future sales prospects. The recently opened port-centric facility The above structural, continuing market at our Wynyard site, with Asda George as changes have enabled the Group to make its core client supported by a ten-year very signiﬁ cant advances in its revenues contractual commitment, has gained and earnings. traction with other clients such as Antler. 23 Clipper Logistics plc Annual Report and Accounts 2014 Operational and Financial Review continued Multi-user operations We are in active discussions with a number The Group encourages the use of multi-user of UK retailers about their international sites, where a multiplicity of customers are logistics requirements, as well as with existing served from a single location. German-based customers about their This facilitates the sharing of specialised online activity, and returns management. evolving needs, particularly in relation to resources, and assists in optimising and balancing demand on people and facilities, in turn allowing the Group to Investment in key personnel provide cost-effective solutions. The Group differentiates itself by providing consultancy-led, value-added services to its actual and prospective client base. We Acquisition of R. Geist Spedition GmbH have established ourselves as a thought & Co. KG leader within the logistics sector, and Clipper Logistics GmbH acquired the this is evidenced both by our customers’ whole of the issued share capital of buy-in to our innovative approach, and R. Geist Spedition GmbH & Co. KG (“Geist”) by independent brand health reviews in October 2013. conducted by an independent market research consultancy. This follows the acquisition in December 2008 of the trade and assets of the The Group is central to the achievement Beständig group of companies out of by its customers of their own objectives administration, by the Group’s former and goals. parent company. Accordingly, we invest in recruiting, training The German entities were subsequently and developing people who are specialists reorganised such that all trading activities in their relevant ﬁ elds. These include were undertaken by Clipper Geist Logistics information technology, solution design, GmbH & Co. KG from 1 March 2014. facilities speciﬁ cation, implementation and management, ecommerce and returns On 16 April 2014, the Company acquired management, and project management from Clipper Group Holdings Ltd, at book and implementation resource. value, its entire investment in other members of the Group, which included 75% of During the 2014 ﬁ nancial year, due to Clipper Geist Logistics GmbH & Co. KG. the very signiﬁ cant organic growth being On 30 April 2014 the Company acquired experienced by the business driven by the remaining 25% of Clipper Geist Logistics its strategic positioning, we invested in GmbH & Co. KG in exchange for the issue additional resources both to deliver the of 800,000 ordinary shares. short term business wins, but also to provide an infrastructure capable of continuing to The acquisition of Geist provides the deliver signiﬁ cant growth going forwards. Group with a platform from which it can: Accordingly, central logistics costs increased - service the needs of German-based from £2.4 million to £4.2 million as a result retailers who wish to move online; of this investment. Whilst further resources - support the European expansion plans of will be required as the business continues UK-based retailers; to grow, the investment in 2014 provided - continue to evolve its service offering to a signiﬁ cantly enhanced infrastructure existing and prospective customers. capable of delivering the short to medium term requirements of the business. 24 Strategic Report | Governance | Financial Statements Operational and Financial Review continued 3. Commercial vehicle division 4. Current trading and outlook The commercial vehicles business delivered The Group secured a number of signiﬁ cant a signiﬁ cantly improved Adjusted EBIT of contract wins in the year to 30 April 2014, £1.8 million (2013: £1.4 million), an increase the full year beneﬁ t of which will be realised of 25.4% on the previous year. in the year to 30 April 2015. These wins included high proﬁ le brands, for example Stormont Truck and Van Ltd was integrated SuperGroup and ASOS. into Northern Commercials in August 2013. This consolidation achieved cost reductions As we look ahead to the 2015 ﬁ nancial in central and administrative functions, year, we have a very strong new business but has also provided a focused platform pipeline. We continue to win new contracts for market share growth in all areas of the within both e-fulﬁ lment logistics and non country in which we operate. e-fulﬁ lment logistics, both in the UK and Europe, through our focus on our retail Northern Commercials operates from specialisms and provision of cost-effective, six dealership locations, and has three value-added solutions. We look forward sub-dealers. Dealerships are located in to updating shareholders on these new Brighouse, Manchester, Northampton, contracts when they are formalised. Dunstable, Tonbridge and Brighton. Thus, the business operates across the north Since the year end we have signed a of England and Wales (with sub-dealers ﬁ ve year contract extension with Tesco, supporting this geographic territory), through to provide additional services to support the midlands, and into the south-east. their on-line clothing strategy. In Germany, we have signed a ﬁ ve year contract The business sold 2,447 new vehicles in the extension with s.Oliver. year, and 416 used vehicles. Key customers include Asda, Ryder, Dawsons, Allied Our returns management service, marketed Bakeries, Clancy Dochra, the Variety Club, under the “Boomerang” brand, continues and a host of other household names. to gain traction with retailers in both the UK and Europe, and we are conﬁ dent that this The business achieved a number of represents a major area of growth important key performance measures in going forward. the year: - Assistance non-stop: Northern The commercial vehicles business is Commercials achieved the best expected to continue to deliver steady response time of all Iveco dealers in the growth in proﬁ tability in the year to UK, averaging 40.2 minutes to arrive to 30 April 2015. provide assistance to breakdowns; - vehicles off-road: Northern Commercials The Board is conﬁ dent in the Group’s was the number one dealer, with an prospects for the full year ahead. Current average of 0.7 days off-road for repairs, trading is in line with our strategic plan, and compared to an Iveco target of 1.8 days; we are conﬁ dent of achieving another - MOT pass rate: 98.9% of vehicles period of excellent ﬁ nancial performance achieved an initial pass; and in the year to 30 April 2015. - parts service: 97% of parts required by customers were delivered within 24 hours. 25 Clipper Logistics plc Annual Report and Accounts 2014 Risk management The Group adopts a formal risk identiﬁ cation and management process designed to ensure that risks are properly identiﬁ ed, prioritised, evaluated and mitigated to the extent that is possible, in order that the Group can achieve its strategic objectives and enjoy long-term success. Risk Management Process The Group adopts the following process: The Board and senior management team are collectively responsible for managing risk across the Group. Risks are reviewed regularly and risk registers are updated at least four times a year. 1. Identify risk: Identify key risks by category (including changes since the last review) 5. Review, monitor and report risk management process: Review and monitor risk management process, and report to Board and Audit Committee 2. Rate risk: Rate each risk (by evaluating and assigning a score to each risk) 4. Execute risk mitigation: Execute agreed risk mitigation and process improvements 3. Identify risk mitigation: Identify mitigating actions required for each risk The Group has identiﬁ ed the following key risks as a result of the risk management process: Strategic: Risk Mitigation Reputation Clipper’s potential to win new business is inﬂ uenced by its reputation for successfully implementing major customer projects. Reputational damage from failed project implementations may have an adverse impact on Clipper’s ability to win new business, and thus limit the Group’s long term growth and success. Employees Failure to develop and retain key staff may prevent the Group from delivering its objectives. Clipper has developed effective project management and governance techniques to ensure that the Company works closely with customers using highly trained and experienced internal staff, to ensure successful project delivery. All projects are reviewed and evaluated on a weekly basis by the relevant operational board members. In addition, independent ‘Brand Health’ reviews are undertaken regularly to monitor customer perception of, and satisfaction with, the Company. The Group offers comprehensive training and experiential learning, and keeps in close contact with employees via ﬂ at structures and effective employee engagement. The Group also ensures that it has competitive terms and conditions, and can respond ﬂ exibly to the needs of employees. 26 Strategic Report | Governance | Financial Statements Risk management continued Operational: Risk Mitigation Loss of operational delivery During periods of major project and merger activity, the focus could move away from operational delivery, thus harming the Group’s relationships with customers. Failure to achieve contractual KPIs Failure to achieve contractual KPIs may result in the loss of existing contracts. Failure to maintain and enhance customer relationships Failure to maintain and enhance customer relationships may lead to the non-renewal of contracts, and/or may prevent the Group from winning new work with existing customers. Loss of an operational site through disaster Loss of an operational site as a result of ﬁ re, ﬂ ood or other disaster would have the potential to seriously disrupt operations. Financial: Risk Liquidity Inadequate cash resources could leave the Group unable to fund its growth plans, thus affecting future ﬁ nancial performance. Credit risk Customer default or insolvency could result in a bad debt. Dedicated start-up and project teams are used in order to minimise disruption to the operation during such times. Contractual Key Performance Indicators (KPIs) are reviewed regularly to ensure operational effectiveness at all times. Reporting measures are in place to measure contractual KPI performance in a timely manner, to ensure compliance, or immediate corrective action. The Group holds formal monthly reviews with key customers as well as maintaining frequent close informal contact with customers. This enables corrective action to be taken quickly in response to customer feedback. In addition, regular brand health reviews are carried out which give customers the opportunity to comment anonymously on any aspect of the customer/Company relationship and service delivery. The Group can then take corrective action if required, based on this feedback. Regular safety audits and inspections and remedial action seek to limit this risk. In the event of a serious incident, each site has a business continuity plan which would come into immediate operation. Mitigation As part of the IPO process, the Group undertook an assessment of its funding requirements in the context of its growth plans, and entered into new facilities with its bank to ensure that expected future growth plans can be funded within these new facilities. The Group will continue to undertake further reviews of funding requirements as its growth plans evolve. Credit checks are performed on all new potential customers, and credit terms and limits are set accordingly. These are reviewed regularly, and adjusted if necessary. Standard terms of trade give the Company a general lien on the customer’s stock for amounts owed. Where customer contracts negate the Company’s standard terms protections against non-payment of amounts due are written into the contract. 27 Clipper Logistics plc Annual Report and Accounts 2014 Corporate Social Responsibility The Group recognises the importance of As a founding member of the Novus Trust We encourage team working by involving Corporate Social Responsibility (“CSR”), we help develop the curriculum, present employees in open days and inter-site and our impact on the environment guest lectures and offer students holiday competitions, as well as organised themed and our people, their development, jobs, work placements and permanent events on special occasions. commitment and relationships with our employment opportunities for two to three customers, the community and other graduates each year. stakeholders are central to our plans. Community events Equal Opportunities The Group is committed to an Equal Opportunities Policy. Supported by training, People development At both corporate and local level we actively policies and our 5 Point Code of Behaviour At every level we provide excellent encourage our sites to participate in good we aim to ensure that no employee is opportunities for our employees. causes through direct funding, provision discriminated against, directly or indirectly, We provide unemployed people in local of resource and/or encouraging our on the grounds of colour, race, ethnic communities with the opportunity for employees to organise fundraising events. and national origins, sexual orientation or training, qualiﬁ cations and jobs via our Recent examples include a sponsored gender, marital status, disability, religion or Clipper Academy programmes. Existing Dragon Boat Race for Martin House, belief, or on the grounds of age. employees develop via driver CPC sponsored cycle rides for Transaid and site qualiﬁ cations, NVQs, apprenticeship and events for Children in Need, Red Nose Day, The above is reﬂ ected in our truly diverse Potential Team Development Programmes. Cancer Research and local charities. workforce. We are happy to consider requests for ﬂ exible working and wherever Our staff can then apply to join our We support various local forums and possible will agree shift patterns which Corporate First Line and Middle sponsor community activities such as a facilitate a balance between work and Management Levels 2 and 3 Aspire children’s football team. family life. Programmes. We support relevant professional qualiﬁ cations and have We are also members of the Disability invested in a Group Training and Employee engagement Forum. Development Manager to internally deliver To encourage employees to give us their management training courses and develop best we aim to provide a competitive level an in-house senior leadership programme. of pay and other beneﬁ ts relative to job and Health and safety skill level, including the provision of retail The Group seeks to protect employees from discount schemes, company contribution to accidents and injuries at work. Our health Schools and universities a pension scheme and life/accident cover. and safety structure is supported by IOSH Many of our distribution centres network qualiﬁ ed representatives and Health and with local schools and colleges to offer We encourage alignment with Group Safety Committees at each site. Each site site visits or support career events. Clipper goals via open communication. We have receives at least two safety audits each is represented on the Employer Liaison an annual conference for our senior staff, year. Serious incidents are escalated and Committee of the Logistics Institute of site employee forums, health and safety accident statistics are monitored. Accidents Hull University. committees, team briefs, our Company are reported and investigated. Health and newsletter ‘Evolve’ and highly visual safety matters are reported and monitored To encourage a greater number and notice boards. at Board level. higher calibre of students to enter the logistics sector we have partnered with We recognise employee contribution and Health and safety training is prevalent Huddersﬁ eld University. loyalty via our Employee of the Month throughout the business – from initial Scheme, Driver of the Year Award and Long induction training, through risk assessed Service awards. task training (e.g. manual handling, fork lift truck and use of knives) to management awareness programmes. 28 Strategic Report | Governance | Financial Statements Corporate Social Responsibility continued Environment Waste recycling CSR policy We recognise the Group’s activities have an The Group considers the best use of The Group recognises the importance of impact on the environment but we believe raw materials using recycled/recyclable environmental protection and is committed we can improve our environmental footprint products where applicable. Waste is sorted to conducting business ethically, responsibly and save energy. This is important to both into plastics, paper/cardboard, wood and in compliance with laws, regulations the Group and our stakeholders. and metal. It is then recycled, reused or and codes of practice applicable to our compacted on site. Our Carbon Management Reduction Programme aims to reduce energy consumption and emissions of greenhouse Commercial gasses from our warehouses and transport Wherever possible we work with our business activities. The CSR and related policies are reviewed and amended where appropriate. ﬂ eets. To this end: customers to build environmental Gender breakdown considerations into our recommended solutions. This is particularly evident with - we are applying the latest environmental our pioneering retail consolidation centres standards as and when we upgrade our which greatly reduce ﬁ nal mile deliveries, estate; congestion and associated emissions when delivering to shopping centres. - we are investing in low energy lighting and testing the advent of LED lighting; - we investigate fuel use, route planning and best design of vehicles across the ﬂ eet to become more efﬁ cient and minimise emissions. We participate in the ECO Stars Fleet Recognition Scheme which recognises ﬂ eet operators who use lower polluting vehicles and effective fuel management – becoming the ﬁ rst multi regional member of this scheme; - we promote environmental awareness via training, including training van and LGV drivers in Safe and Fuel Efﬁ cient Driving – using the latest simulator technology, which in turn avoids fuel use associated with the training; and - we encourage employees to use ‘green’ transport. Our company car lists offer the use of newer, lower emission vehicles and our sites promote the use of car sharing. Male Female Board of Directors Senior Management Group 100% 79% 64% 0% 21% 36% Approved by the Board and signed on its behalf by: David Hodkin Chief Financial Ofﬁ cer 28 August 2014 29 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Annual Report and Accounts 2014 Governance 30 31 Clipper Logistics plc Annual Report and Accounts 2014 Board of Directors The following table lists the names, positions and dates of birth of the current members of the Board: Name Position Steven (Steve) Nicholas Parkin Antony (Tony) Gerard Mannix David Arthur Hodkin Sean Eugene Fahey Paul Nigel Hampden Smith Stephen Peter Robertson Ronald (Ron) Charles Series Michael (Mike) John Russell Executive Chairman Chief Executive Ofﬁ cer Chief Financial Ofﬁ cer Chief Information Ofﬁ cer Senior Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Date of Birth 17 December 1960 1 August 1963 14 February 1961 28 March 1970 1 December 1960 17 November 1954 27 August 1951 19 January 1951 The business address of each Director is Gelderd Road, Leeds, West Yorkshire LS12 6LT. Steve Parkin, Executive Chairman Tony Mannix, Chief Executive Ofﬁ cer David Hodkin, Chief Financial Ofﬁ cer Steve, a fashion logistics specialist, founded Tony was appointed Chief Executive Ofﬁ cer David joined the Group as Group Chief the Group in 1992. As Executive Chairman, of the Group in May 2014. Tony joined Financial Ofﬁ cer in 2003. David has held a Steve is responsible for the strategic Clipper in 2006 as Managing Director of the variety of board level roles prior to joining direction of the Group. Steve has extensive UK logistics division. Tony has over 25 years’ Clipper, including Group Finance Director experience of retail logistics particularly in experience in the logistics sector, and has of Symphony Group plc, Finance Director of fashion. He holds and pursues strategic held a number of senior roles with Roseby’s Kunick Leisure Ltd, and a number of senior level discussions with major retailers. plc (which became part of Homestyle roles in Magnet Ltd. David is a In addition, Steve drives the Group’s Group plc) becoming Logistics Director. member of the Chartered Institute of acquisition strategy. Steve is the chairman Tony has particular experience of operating Management Accountants. of the Nomination Committee. in complex retail logistics environments, including the design and speciﬁ cation of both distribution centres and warehouse management systems. Tony began his career in logistics with the Burton Group, after working in the construction industry following his graduation with a degree in Architectural Engineering. Sean Fahey, Chief Information Ofﬁ cer Sean joined Clipper in 1992, initially as the director responsible for accounting and IT. Sean has extensive experience of designing 32 Strategic Report | Governance | Financial Statements Board of Directors continued and implementing complex logistics solutions, based on many years of direct operational management experience, which complement his skills as an IT specialist. As the Group has grown, Sean has held positions of Development Director, Project Director, and now has responsibility for the IT, projects and implementation functions as Chief Information Ofﬁ cer, along with his responsibilities on the Board. Stephen Robertson, Independent Non- Executive Director Stephen joined the Group as Non-Executive Director on 16 May 2014. Stephen has many years of experience in the retail industry and has held executive positions at Kingﬁ sher plc, WH Smith plc and Woolworths Group plc. Stephen was previously a director of the British Retail Consortium and is currently an Advisory Board Member of Retail Week. Stephen’s current non- executive directorships include Timpson Group plc and Hargreaves Lansdown plc. Stephen is a member of the Audit Paul Hampden Smith, Senior Independent Non-Executive Director Paul joined the Group as Senior Independent Non-Executive Director on Committee. 16 May 2014. Paul retired from his role as Group Finance Director of Travis Perkins plc in 2013, following 25 years with the group. During that time, the group enjoyed tenfold growth and Paul oversaw a signiﬁ cant number of acquisitions ranging from £1 million to £1 billion in size. During the last ten years, Paul has held non-executive directorships on the boards of DX Services plc, Redrow plc, Bellway plc and Pendragon plc. Paul was also appointed as Chairman plc. Most recently, he has held executive positions at iSOFT Group Ltd (listed on the Australian Securities Exchange), SIAC Group and Viridan Group and was involved in the successful restructuring of Nakheel PJSC, the real estate arm of Dubai World. Ron is currently appointed as non- executive director at Ofﬁ ce Team. Ron is a member of the Remuneration Committee and the Nomination Committee. Mike Russell, Independent Non-Executive Director Mike Russell was appointed Non-Executive Director of Clipper’s former parent company with effect from 3 January 2011, and was appointed Non-Executive Director of the Company on 16 May 2014. He qualiﬁ ed as a Chartered Certiﬁ ed Accountant with a subsidiary of Imperial Chemical Industries, following which he held the position of Finance Director of a subsidiary of Allied Lyons plc. He joined Asda Stores Ltd as Chief Accountant in 1986 and subsequently became Finance Director of the Stores Division. He was of the Audit Committee in each of these Ron Series, Independent Non-Executive appointed Group Finance Director of Nurdin non-executive roles. Paul is the chairman of Director & Peacock plc, a FTSE 250 company, in the Audit Committee and is a member of Ron joined the Group as Non-Executive early 1996 prior to the sale of the business the Remuneration Committee. Director on 16 May 2014. Over the past to Booker plc. From 1997 to 2011 he was 20 years, Ron has held executive and an executive director of Prize Food Group, non-executive positions with a number of a private equity-backed business, initially as companies with international operations Group Finance Director and, from 2005, as in transport, logistics, shipping, real estate Chief Executive Ofﬁ cer. Mike is chairman and information technology. Included of the Remuneration Committee and a among them are Tuffnells Parcel Express member of the Audit Committee and the where he was chairman during its ownership Nomination Committee. by 3i and UK-listed companies such as Davies and Newman plc and LEP Group 33 Clipper Logistics plc Annual Report and Accounts 2014 Corporate Governance Report Chairman’s introduction Compliance with the UK Corporate The Board delegates to management the Governance Code 2012 day-to-day running of the business within Dear Shareholder, The Board is committed to maintaining deﬁ ned risk parameters. Board meetings Clipper listed its Ordinary Shares on high standards of corporate governance are scheduled to coincide with key events the main market of the London Stock and maintaining a sound framework for the in the corporate calendar and in future this Exchange on 4 June 2014 (“Admission” control and management of the Group. will include the interim and ﬁ nal results and date). The Listing Rules of the Financial annual general meeting. Conduct Authority, including the UK The UK Corporate Governance Code 2012 The Board has adopted a formal schedule Corporate Governance Code (the (the “Code”) applies to ﬁ nancial years of matters reserved for its approval and has “Code”), have only therefore applied beginning on or after 30 September 2012. delegated other speciﬁ c responsibilities to to the Company since that date. In the A copy of the Code can be found at its Committees. This schedule sets out key months leading up to the listing, the Board www.frc.co.uk. implemented a number of measures aspects of the affairs of the Company which the Board does not delegate, including key to ensure compliance with the Code, This Report, which incorporates reports from strategic, operational and ﬁ nancial issues. in particular, provisions relating to the the Audit and Nomination Committees on composition of the Board and its principal pages 38 to 43 together with the Strategic All Directors have access to the advice and Committees. On Admission, the Board Report on pages 4 to 29, the Directors’ services of the Company Secretary who committed itself to the highest standards Remuneration Report on pages 44 to 65 has responsibility for ensuring compliance of corporate governance and to maintain and the Directors’ Report on pages 66 to 69, with the Board’s procedures. All the Directors a sound framework for the control and describes how the Company has applied have the right to have their opposition to or management of the Group. Since the the relevant principles of the Code. concerns over any Board decision noted Company only recently listed, it is not practicable to expect full compliance with the provisions of the Code, therefore The role of the Board in the minutes. The Board has adopted guidelines by which Directors may take independent professional advice at the the Company did not comply with the As at the Admission date, the Board consists Company’s expense in the performance nine provisions of the Code for the year of 4 Non-Executive Directors and 4 Executive of their duties. ended 30 April 2014. Accordingly, this Directors. Biographies of all members of the report includes a description of how the Board appear on pages 32 and 33. Company has applied the principles Conﬂ icts of interests and provisions of the Code since 4 June The Board is responsible for leading and In line with the requirements of the 2014 and how it intends to apply those controlling the Group and has overall Companies Act, each Director has notiﬁ ed principles throughout the remainder of authority for the management and the Company of any situation in which 2014 and into 2015. conduct of the Group’s business, strategy he or she has, or could have, a direct or and development. The Board is also indirect interest that conﬂ icts, or possibly responsible for ensuring the maintenance may conﬂ ict, with the interests of the of a sound system of internal control and Company (a situational conﬂ ict). These were risk management (including ﬁ nancial, considered and approved by the Board in operational and compliance controls and accordance with the Company’s Articles of for reviewing the overall effectiveness of Association and each Director informed of systems in place) and for the approval of the authorisation and any terms on which it any changes to the capital, corporate and/ was given. The Board has formal procedures or management structure of the Group. to deal with Directors’ conﬂ icts of interest. The Board reviews and, where appropriate, approves certain situational conﬂ icts of interest that were reported to it by Directors, and a register of those situational conﬂ icts is maintained and will be reviewed by the Board going forward. Steve Parkin Executive Chairman 34 Strategic Report | Governance | Financial Statements Corporate Governance Report continued Directors’ indemnities Directors when necessary. The Senior Information, meetings and attendance The Articles of Association of the Company Independent Director should be available The Board has a full programme of Board require it to indemnify ofﬁ cers of the to shareholders if they have concerns which meetings planned for 2014 and 2015. At Company, including ofﬁ cers of wholly- contact through the normal channels of these meetings, the Board will review the owned subsidiaries, against liabilities arising the Chairman, CEO or other Executive Group’s long-term strategic direction and from the conduct of the Group’s business, to Directors has failed to resolve or for ﬁ nancial plans and monitor on a regular the extent permitted by law. The Group has which such contact is inappropriate. Paul basis the Group’s performance against therefore purchased directors’ and ofﬁ cers’ Hampden Smith has been appointed Senior an agreed strategy and business plan. liability insurance during the year. Independent Director. In addition, the Board will agree key objectives for the Group on an annual basis Board Committees Board balance and independence and will then monitor performance against Subject to those matters reserved for its The Code recommends that at least these objectives. decision, the Board has delegated to half the Board of Directors of UK listed its Audit, Nomination and Remuneration companies, excluding the chairman, The Board has an agreed procedure for Committees certain authorities. There are should comprise Non-Executive dealing with conﬂ icts of interest in relation written terms of reference for each of these Directors determined by the Board to be to matters which are scheduled for Board Committees, available on request from the independent in character and judgement consideration. Company Secretary, and separate reports and free from relationships or circumstances for each Committee are included in this which may affect, or could appear to The Chairman is responsible for ensuring Annual Report and Accounts from pages affect, the director’s judgement. that the Directors receive accurate, 38 to 65. timely and clear information. Prior to The Board regards all of the Non-Executive each scheduled Board meeting, a pack Directors as Independent Non-Executive is circulated in respect of each ﬁ nancial Role of the Chairman and Chief Executive Directors within the meaning of the Code period, which includes an update on key The Board is chaired by Steve Parkin. The and free from any business or other performance targets, trading performance Chairman is responsible for the effective relationship that could materially interfere against budget and includes detailed leadership of the Board, having regard with the exercise of their independent ﬁ nancial data and analysis. Board packs for the interests of all stakeholders and judgement. The Board believes that are generally distributed seven days prior to promoting high standards of corporate the current directorate will enhance each meeting to provide sufﬁ cient time for governance. Tony Mannix is the Chief considerably its ability to develop the Directors to review their papers in advance. Executive Ofﬁ cer and is responsible Group’s operations. for implementing the Board’s strategy and leading the senior management If Directors are unable to attend a Board meeting for any reason, they nonetheless receive the relevant papers and are team. The role is distinct and separate to Role of the Company Secretary consulted prior to the meeting and their that of Chairman and clear divisions of Paul White is the Company Secretary. views made known to the other Directors. accountability and responsibility have The role of the Company Secretary is to been agreed by the Board. develop, implement and maintain good corporate governance practices. This Development includes supporting the Chairman and In preparation for Admission, all Directors Role of the Senior Independent Director Non-Executive Directors as appropriate, received an induction brieﬁ ng from the (SID) managing Board and Board Committee Group’s legal advisor, DWF, on their duties The Code recommends that the Board of meetings, ensuring that appropriate levels and responsibilities as Directors of a Directors of a Company with a premium of directors’ and ofﬁ cers’ insurance is in publicly quoted company. In addition, the listing on the Ofﬁ cial List should appoint place and that the Group is compliant with new Non-Executive Directors received full one of the Non-Executive Directors to be statutory and regulatory requirements. presentations, including the IPO roadshow. the Senior Independent Director to provide a sounding board for the Chairman and to serve as an intermediary for the other 35 Clipper Logistics plc Annual Report and Accounts 2014 36 Strategic Report | Governance | Financial Statements Corporate Governance Report continued Board evaluation In the meantime, the forthcoming Annual Given that a majority of the Non-Executive General Meeting will be the ﬁ rst since Directors were only appointed in the months the Company re-registered as a public immediately preceding the listing in June company on 15 May 2014. Accordingly, all 2014, the Board believes that a meaningful the Directors will be offering themselves for evaluation of the Board can only take place election at the AGM to be held at Clipper after it has been working together for a Logistics, Gelderd Road, Leeds, LS12 6LT on reasonable time. An evaluation policy will 29 September 2014 at 11.00am full details be developed and implemented before of which are set out in the notice of meeting the end of 2014. The Senior Independent accompanying this Annual Report. Director, Paul Hampden Smith, will evaluate the performance of the Chairman, who As noted above, the current Board has been has been in post since inception of the in post for only a short period of time and Company. Election of Directors so a formal evaluation of the performance of the Board, its principal Committees and the individual Directors would be of limited value. However, pending the development The Board can appoint any person to be and implementation of a formal evaluation a Director, either to ﬁ ll a vacancy or as an process during 2014, the Board is satisﬁ ed addition to the existing Board provided that each Director remains competent to that the total number of Directors does discharge his responsibilities as a member not exceed 12, the maximum prescribed of the Board. in the Company’s Articles of Association. Any Director so appointed by the Board shall hold ofﬁ ce only until the next following External appointments annual general meeting and shall then be The Executive Directors may accept eligible for election by the shareholders. outside appointments provided that such appointments do not in any way prejudice In accordance with the Articles of their ability to perform their duties as Association, at every annual general Executive Directors of the Company. meeting of the Company one-third of the None of the Executive Directors currently Directors or the number nearest to but hold any such outside appointments. not exceeding one-third shall retire from ofﬁ ce. The Directors to retire shall be ﬁ rst The Non-Executive Directors’ appointment those who wish to retire, and then those letters are not speciﬁ c about the maximum who have been longest in ofﬁ ce since their time commitment, recognising that there last appointment or re-appointment. When is always the possibility of an additional time a Director retires at an Annual General commitment and ad hoc matters that may Meeting in accordance with the Articles, the arise from time to time, particularly when the Company may, by ordinary resolution at the Group is undergoing a period of increased meeting, ﬁ ll the ofﬁ ce being vacated by re- activity. The average time commitment electing the retiring Director. If the Company inevitably increases where a Non-Executive does not ﬁ ll the vacancy at the meeting, Director assumes additional responsibilities the retiring Director shall nevertheless be such as being appointed to a Board deemed to have been re-elected, except Committee or as a Non-Executive in the cases identiﬁ ed by the Articles. The Director on the boards of any of the Company intends to continue this practice Company’s subsidiaries. but will review it regularly. 37 Clipper Logistics plc Annual Report and Accounts 2014 Nomination Committee Report Committee Chairman’s introduction Composition Diversity The UK Corporate Governance Code Whilst the Group pursues diversity, including The Nomination Committee is responsible recommends that a majority of the gender diversity, throughout the business, for identifying and nominating candidates members of a nomination committee and the Board endorses the aspirations of for the approval of the Board to ﬁ ll Board should be independent Non-Executive the Davies Review on Women on Boards, vacancies and to keep under review Directors. The Nomination Committee the Board is not committing to any speciﬁ c the balance of skills, knowledge and is chaired by Steve Parkin and its other targets. Instead, the Board will engage experience on the Board to ensure the members are Ron Series and Mike Russell. executive search ﬁ rms who have signed up orderly evolution of the membership of the The Nomination Committee will meet not to the voluntary code of conduct setting Board and to make recommendations to less than twice a year. the Board on composition and balance. out the seven key principles of best practice to abide by throughout the recruitment process and will continue to follow a policy The Nomination Committee will be Roles and responsibilities of appointing talented people at every level proactive in discharging these The Nomination Committee assists the to deliver high performance. The Board will responsibilities, cognisant of the importance Board in discharging its responsibilities also ensure that its own development in this of succession planning and the need to relating to the composition and make- area is consistent with its strategic objectives align Board and executive leadership skills up of the Board and any Committees and enhances Board effectiveness. to the Group’s long-term strategy. of the Board. It is also responsible for periodically reviewing the Board’s structure Prior to the publication of the prospectus, and identifying potential candidates to Remuneration Committee the Board met on 16th May 2014 to be appointed as Directors or Committee The Directors’ Remuneration Report can be consider the appointments of new members as the need may arise. The found on pages 44 to 65. This Report has Directors. Accordingly, Paul Hampden Nomination Committee is responsible for been prepared in accordance with the Smith, Mike Russell, Stephen Robertson and evaluating the balance of skills, knowledge new regulations governing the way in which Ron Series were appointed to the Board and experience and the size, structure and Directors’ remuneration is voted upon and with effect from 16 May 2014. composition of the Board and Committees includes details of the role and composition of the Board, retirements and appointments of the Remuneration Committee. of additional and replacement Directors and Committee members and makes appropriate recommendations to the Board Audit Committee on such matters. The Audit Committee report can be found on pages 40 to 43. What the Nomination Committee did in 2014 Relations with shareholders Following consultation by Steve Parkin, As part of the IPO roadshow in 2014, the Chairman, with the sponsor and major Board met a large number of investors in shareholders regarding its composition, a the United Kingdom. The meetings involved Nomination Committee was established by the Chairman, Chief Executive Ofﬁ cer and a resolution of the Board dated 16th May Chief Financial Ofﬁ cer. 2014, at which meeting terms of reference were considered and adopted. 38 As part of its future investor relations programme, the Group will aim to maintain an active dialogue with its key stakeholders including institutional investors to discuss issues relating to the performance of the Group including strategy and new developments. The Non-Executive Directors are available to discuss any matter stakeholders might wish to raise. Investor relations activity and a review of the share register are standing items on the Board’s agenda. Reports from analysts and brokers are circulated to the Board. The Chairman and Non-Executive Directors are available to attend investor relations meetings or to request meetings with investors or analysts independent of the Group’s management if required. Annual General Meeting The Company’s ﬁ rst Annual General Meeting since Admission will take place on 29 September 2014 at 11.00am, at Clipper Logistics, Gelderd Road, Leeds, LS12 6LT and the chairmen of each of the Board’s Committees will be present to answer questions put to them by shareholders. The Annual Report and Accounts and Notice of the Annual General Meeting will be sent to shareholders at least 20 working days prior to the date of the meeting. To encourage shareholders to participate in the AGM process, the Company proposes to offer electronic proxy voting through the CREST service and all resolutions will be proposed and voted on at the meeting on an individual basis by shareholders or their proxies. Voting results will be announced through the Regulatory News Service and made available on the Company’s website. By order of the Board. Steve Parkin Executive Chairman Strategic Report | Governance | Financial Statements | 39 39 Clipper Logistics plc Annual Report and Accounts 2014 Audit Committee Report Committee Chairman’s introduction Composition The ultimate responsibility for reviewing and The Code recommends that an Audit approving the Annual Report and Financial The Audit Committee was established by Committee should comprise at least 3, Statements and the half-yearly reports a resolution of the Board dated 16 May or in the case of smaller companies, 2 remains with the Board. 2014, at which meeting terms of reference independent Non-Executive Directors (other were considered and adopted. The Board than the chairman) and that at least 1 The Board has requested that the Audit further resolved to appoint Mike Russell member should have recent and relevant Committee advise them in ensuring that and Stephen Robertson to the Audit ﬁ nancial experience. The Audit Committee the Financial Statements, when taken Committee under my chairmanship. is chaired by Paul Hampden Smith and as a whole, are fair, balanced and Under its terms of reference, the Audit its other members are Mike Russell and understandable and provide the information Committee is required to meet at least Stephen Robertson. By virtue of their former necessary for shareholders to assess the three times in each year at appropriate executive roles, details of which are set out Group’s performance, business model times in the reporting and auditing cycle. on page 33, the Directors consider that and strategy. Following Admission, the Audit Committee Paul Hampden Smith and Mike Russell have has met twice. recent and relevant ﬁ nancial experience. The primary function of the Audit the Code in this regard. The Chief Financial As explained above, the Audit Committee Committee is to assist the Board in fulﬁ lling Ofﬁ cer and Company Secretary attend met twice following Admission. In June, its responsibilities to protect the interests meetings of the Audit Committee the Audit Committee discussed with the The Company is therefore compliant with Activities of the Audit Committee of the shareholders with regard to the by invitation. integrity of the ﬁ nancial reporting, audit, risk management and internal controls. external auditor the audit planning report, with particular reference to signiﬁ cant risks highlighted in the planning document, Roles and responsibilities together with the audit scope and timetable. In this report, I explain how the Audit The Audit Committee assists the Board in In August, the Audit Committee discussed Committee has discharged these discharging its responsibilities with regard to: the progress of the audit and reviewed the responsibilities, with speciﬁ c reference - Agreeing the scope of the annual audit draft auditors report. On 28 August 2014, the to the requirement of the UK Corporate and the annual audit plan and monitoring Audit Committee reviewed and approved Governance Code, (the “Code”) to the same; for consideration by the Board the ﬁ nancial address signiﬁ cant ﬁ nancial statement - Monitoring, making judgements and results for the year ended 30 April 2014. reporting issues and to explain how the recommendations on the ﬁ nancial As part of that review process, the members Audit Committee assessed external audit reporting process and the integrity and of the Audit Committee were provided with effectiveness and safeguards in relation clarity of the Group’s Financial Statements; a draft of the full Annual Report enabling to the provision by the auditor of - Considering the appointment of the them to ensure that the numbers therein non-audit services. Group’s Auditors and their remuneration are consistent with those in the Financial including reviewing and monitoring Statements or are sourced from appropriate independence and objectivity and data. More importantly, the Audit Committee agreeing and monitoring the extent of the assessed whether the words used were non-audit work that may be undertaken; consistent with their understanding of the and Group’s business obtained through Board - Reviewing and monitoring the adequacy and Audit Committee meetings and other and effectiveness of the internal control interaction they had had with management, and risk management policies. using their experience to assess whether The Audit Committee will give due fair, balanced and understandable. This consideration to laws and regulations, the additional review by the Audit Committee, provisions of the Code and the requirements supplemented by advice received from the Annual Report taken as a whole is of the Listing Rules. external advisors during the drafting process assisted the Board in determining that the report is fair, balanced and understandable at the time that it is approved. The Audit 40 Strategic Report | Governance | Financial Statements Audit Committee Report continued Committee considered the appropriateness Assessment of effectiveness of The Audit Committee has authority to of preparing the Financial Statements external audit take independent advice as it deems on a going concern basis, including The Audit Committee oversees the appropriate in order to resolve issues on consideration of forecast plans and relationship with the external auditors and auditor independence. No such advice has supporting assumptions and concluded considers the re-appointment of the Group’s to date been required. that the Group’s ﬁ nancial position was such auditors, Ernst & Young LLP, before making a that it continued to be appropriate for the recommendation to the Board to be put to Financial Statements to be prepared on a shareholders. Independence assessment by the going concern basis. Audit Committee As Admission occurred after the Group’s Based on the fact that the audit ﬁ nancial year end, on 4 June 2014, Ernst engagement partner rotation policy has Signiﬁ cant issues considered in relation & Young LLP had already been appointed been complied with, and separate external to the Financial Statements as auditor, and the audit plan agreed. ﬁ rms are engaged for taxation advisory The Audit Committee, together with the However, the Audit Committee met services, the Audit Committee is satisﬁ ed Board considered what were the signiﬁ cant subsequent to Admission, and approved the that the independence of Ernst & Young LLP risks and issues in relation to the Financial audit plan for the year ended 30 April 2014 is not impaired. Statements and how these would be and reviewed the auditor’s ﬁ ndings and addressed. management representation letters. Furthermore, Ernst & Young LLP has provided an independence report to Revenue Recognition Prior to recommending the appointment the Audit Committee, in which they have - The Group has a multiplicity of complex of Ernst & Young LLP at the forthcoming conﬁ rmed that they are independent, contract mechanisms. As a result there AGM to the Board, the Audit Committee that their objectivity is not compromised, could be a risk of misstatement of conducted a review of the external auditor’s and that they have complied with the revenue. performance and ongoing independence Auditing Practices Board’s Ethical Standards - To mitigate this risk, the revenue taking into consideration input from (including in relation to the supply of non- recognition methodology adopted is management, consideration of responses audit services). kept under regular review to ensure that to questions from the Audit Committee it remains appropriate. and the audit ﬁ ndings reported to the Audit The Audit Committee noted that Ernst Committee. Based on this information, & Young LLP had been appointed Accounting for the re-organisation the Audit Committee concluded that the as Reporting Accountants for the IPO of the Group external audit process had been efﬁ ciently transaction prior to their appointment as - Prior to Admission, in April 2014, a run and that Ernst & Young LLP continued to external auditor for the Group. reorganisation of the Group was carried prove effective in its role as external auditor. out. As a result of this corporate restructure, the preparation of the Financial The Audit Committee has assessed the performance and independence of the Statements became more complex than Independence safeguards external auditor and recommended to the would ordinarily be the case. In accordance with best practice and Board the re-appointment of Ernst & Young - The accounting and related disclosures professional standards, external auditors LLP as auditor until the conclusion of the were therefore subject to additional are required to adhere to a rotation policy AGM in 2015. reviews by the Audit Committee and whereby the audit engagement partner Chief Financial Ofﬁ cer. is rotated after 5 years. The current audit engagement partner was appointed in Internal audit Classiﬁ cation of discontinuing 2014. The external auditors are also required The Board has considered the beneﬁ ts that head ofﬁ ce costs periodically to assess whether, in their an internal audit function might bring to the - Certain costs have been classiﬁ ed as professional opinion, they are independent Group. They have concluded that, due to discontinuing post Admission. and those view are shared with the Audit the tight ﬁ nancial controls in place across - We have considered and reviewed the Committee. treatment of such costs to ensure that they are correctly classiﬁ ed and disclosed in the Financial Statements. the Group, and the close management of ﬁ nancial matters by the Executive Directors, an internal audit function would not currently provide additional assurance. 41 Clipper Logistics plc Annual Report and Accounts 2014 Audit Committee Report continued In terms of operational matters, the - An annual Board review of corporate The Board, with advice from the Audit specialised nature of the Group’s activities strategy, including a review of material Committee, is satisﬁ ed that effective systems means that a non-specialist internal audit business risks and uncertainties facing the for internal control and risk management are function would not provide additional comfort business; in place which enable the Group to identify, over the Group’s operational management. - Established organisational structure with evaluate and manage key risks, and which The Board will continue to evaluate this clearly deﬁ ned lines of responsibility and accord with the guidance of the Turnbull matter, and the Audit Committee will formally levels of authority; Committee on internal control updated consider the issue annually. - Documented policies and procedures; and by the FRC in 2005. These processes have - Regular review by the Board of ﬁ nancial been in place throughout the ﬁ nancial budgets, forecasts and covenants with year and up to the date of approval of the Internal control and risk management performance reported to the Board Financial Statements. Further details of risk The Board is responsible for the overall monthly. system of internal controls for the Group and management frameworks and speciﬁ c material risks and uncertainties facing the for reviewing its effectiveness. It carries out In reviewing the effectiveness of the system business can be found on pages 26 and 27. such a review at least annually, covering of internal controls, the Audit Committee all material controls including ﬁ nancial, will, going forward, receive self-assurance operational and compliance controls and statements from the Operational Directors Whistleblowing risk management systems. and senior managers responsible for the The Group has in place a Whistleblowing principal business units conﬁ rming that Policy which encourages employees to report The system of internal controls is designed controls and risk management processes any malpractice or illegal acts or omissions to manage rather than eliminate the risk in their business units have been operated or matters of similar concern by other of failure to achieve business objectives satisfactorily. These returns will be reviewed employees or former employees, contractors, and can only provide reasonable and by the Audit Committee and challenged suppliers or advisors using a prescribed not absolute assurance against material where appropriate. The CFO will be reporting procedure. The Whistleblowing misstatement or loss. responsible for compiling and maintaining Policy is complemented by an Anti-bribery a risk register to monitor all of the risks and Corruption Policy, and a Gifts and Operating policies and controls are in place facing the business. The key risks will then be Entertainment Policy. and have been in place throughout the summarised for review and approval by the ﬁ nancial year under review, and cover a Audit Committee for inclusion in the Annual These policies facilitate the reporting of wide range of issues including ﬁ nancial Report. In addition, the Audit Committee any ethical wrongdoing or malpractice reporting, capital expenditure, information will also regularly review the ﬁ nancial and or suspicion which may constitute ethical technology, business continuity and accounting controls. management of employees. wrongdoing or malpractice. Examples include bribery, corruption, fraud, dishonesty In respect of the Group’s ﬁ nancial reporting, and illegal practices which may endanger Detailed policies ensure the accuracy and the ﬁ nance department is responsible for employees or third parties. reliability of ﬁ nancial reporting and the preparing the Group Financial Statements preparation of the Financial Statements, using a well-established consolidation There have been no instances of including the consolidation process. The key process and ensuring that accounting whistleblowing during the year under review. elements of the Group’s ongoing processes policies are in accordance with International for the provision of effective internal control Financial Reporting Standards. All ﬁ nancial and risk management systems, in place information published by the Group is subject Accountability throughout the year and at the date of this to the approval of the Audit Committee. The Board is required to present a fair, report, include: balanced and understandable assessment - Regular Board meetings to consider There have been no changes in the Group’s of the Company’s ﬁ nancial position and matters reserved for the Directors’ internal controls during the ﬁ nancial year prospects. The responsibilities of the Directors consideration; under review that have materially affected, and external auditor are set out on pages 70 - Regular management reporting, providing or are reasonably likely to materially affect, and 74 respectively. a balanced assessment of key risks and the Group’s control over ﬁ nancial reporting. controls; 42 Paul Hampden Smith Chairman, Audit Committee 43 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Report Committee Chairman’s introduction This report contains the material required to be set out as the Directors’ Remuneration On behalf of the Board, I am pleased to Report for the purposes of Part 4 of present the ﬁ rst Directors’ Remuneration The Large and Medium-sized Companies Report which Clipper has prepared and Groups (Accounts and Reports) following its Admission in June 2014. (Amendment) Regulations 2013, which amended The Large and Medium-sized The year to 30 April 2014 was a very Companies and Groups (Accounts signiﬁ cant year for Clipper, covering and Reports) Regulations 2008 the period in which the Company was (“the DRR regulations”). preparing for its IPO. As set out more fully in the Strategic Report, the Group’s Section 1 represents the Directors’ operating and ﬁ nancial performance Remuneration Policy. This Policy will take remained strong and provides a good effect, subject to the approval of the platform for future growth. shareholders, immediately after the By reporting on a ﬁ nancial year during 2014 AGM. which the Company was unlisted, the Section 2 contains the implementation Remuneration Report for this year inevitably sections of the Remuneration Report shows a position of transition in terms of (“Implementation Report”). The auditors the payments made to Directors. The have reported on certain parts of the Remuneration Report also sets out the Implementation Report and stated whether, proposed Directors’ Remuneration Policy in their opinion, those parts have been which, if approved at our 2014 AGM, properly prepared in accordance with the will apply to all payments made to our Companies Act 2006. Those parts of the Directors for up to three years from Implementation Report which have been that date. subject to audit are clearly indicated. 44 45 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Report continued In anticipation of Admission, the Remuneration the increases awarded to the workforce as Committee undertook a review of the Group’s a whole, as well as the performance of the Remuneration Policy for senior management, Group and the individual. including the Executive Directors, in order to ensure that it is appropriate for the listed - Pension contributions and beneﬁ ts in company environment. kind are generally unchanged from pre-Admission levels. Overall, the Directors’ Remuneration Policy maintains a high level of consistency with - Executive Directors and senior managers the Group’s outlook on pay from before will be eligible to participate in an annual Admission, acknowledging that many roles incentive plan (“AIP”), which will be within the senior management team have subject to the achievement of stretching not fundamentally changed. However, performance conditions which will be set while ensuring that no more is paid than by the Remuneration Committee at the is necessary, the new policy does take beginning of each ﬁ nancial year. In the account of the changes in the Group’s year to 30 April 2015 the AIP performance structure brought about by Admission, and condition will be based on Adjusted EBIT appropriate but not excessive annual and targets. AIP outcomes will be paid in cash long-term incentives have been introduced. and will be capped at 50% of base salary for the Executive Directors. The aim of the Directors’ Remuneration Policy is to provide an appropriate pay - If approved by shareholders at the AGM, structure for the Executive Directors to long-term incentives will be delivered ensure their retention and to continue to through the Performance Share Plan focus them on delivering strong ﬁ nancial (“PSP”). The Remuneration Committee’s performance. The Group has a strong ‘team intention is to grant Executive Directors culture’ and accordingly there is consistency PSP awards annually, with the value of in how packages are structured across the shares subject to awards being capped whole senior management team, with the at 150% of base salary per annum, with intention being that all Executive Directors an award of 100% for the ﬁ rst grant. The and senior managers should participate performance conditions for initial awards in the same annual incentive plan and will require the achievement of stretching long-term incentive plan from Admission, earnings per share (EPS) growth targets and with all of the team being incentivised over 3 ﬁ nancial years commencing with on the same performance measures. the ﬁ nancial year ending 30 April 2015. While market practice amongst FTSE - Clawback provisions can be applied to SmallCap companies has been considered AIP and PSP outcomes, consistent with in setting the Directors’ Remuneration Policy, best practice. the Company has viewed this information as a reference point and not as an inﬂ exible - Within our policy we have also been clear framework to be followed without as to the maximum caps which the new robust challenge. reporting regulations require that we state for each element of pay - we will operate Key aspects of the Policy include: within these caps for the duration of the - Base salaries will be reviewed as policy period. It should be noted that any appropriate following Admission, but no caps higher than current levels of pay are more frequently than annually. only there to provide suitable ﬂ exibility In reviewing base salaries, the policy is for and will not lead to an automatic any increases to take close account of inﬂ ationary impact. 46 Strategic Report | Governance | Financial Statements Directors’ Remuneration Report continued Format of the Report and matters The Remuneration Committee believes to be approved at our AGM it is important that all of these votes are The regulations governing the Directors’ passed by shareholders to ensure that remuneration reports of listed companies our Directors’ Remuneration Policy can require that we split our report into two operate as intended. The Policy has been sections: the Policy Report sets out proposed to achieve a very high degree the Group’s forward-looking Directors’ of consistency of treatment for all of the Remuneration Policy and the separate senior management team. Consistency of Implementation Report gives details of treatment and alignment within our team the payments made to Directors in the is something which the Remuneration year ended 30 April 2014, as well as other Committee regard as very important to required disclosures. ensure that the strong team culture within the Group continues. This culture is a key At our 2014 AGM there will be a number reason why the Group has performed so of votes on remuneration matters: positively to date, and we believe that - a vote on the Directors’ Remuneration appropriately structured remuneration Policy as set out in Part A of this arrangements for our senior management Remuneration Report; team can make a positive contribution to - a vote on the remaining implementation drive continued good performance. sections of this Remuneration Report, as set out in Part B; The Remuneration Committee hopes - a vote to approve the PSP; that you will support our approach to - a vote to approve the all-employee the challenges that we will face on Sharesave Plan; and remuneration matters as we transition - a vote to authorise the participation of to a listed company. The Remuneration three of our Executive Directors in the PSP Committee is conﬁ dent that the in accordance with the requirements of Remuneration Policy is the correct one for the Takeover Panel for “Concert Parties”, the Group in its next stage of development and to give the same approval in and hopes that it can rely on the support respect of the Sharesave Plan. of shareholders for all of the remuneration- related resolutions at the 2014 AGM. Mike Russell Chairman, Remuneration Committee 47 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Policy The Directors’ Remuneration Policy as set out in this section of the Remuneration Report will take effect for all payments made to Directors from the date of the AGM, which will be held on 29 September 2014. Element and purpose Policy and operation Maximum Base salaries will be reviewed each year by the Remuneration Committee. The Remuneration Committee does not strictly follow data but uses it as a reference point in considering, in its judgment, the appropriate level of salary having regard to other relevant factors including corporate and individual performance and any changes in an individual’s role and responsibilities. Base salary is paid monthly in cash. The Executive Directors may receive a car allowance or company car, fuel allowance, private family medical cover and insurance beneﬁ ts. The Remuneration Committee reserves discretion to introduce new beneﬁ ts where it concludes that it is appropriate to do so, having regard to the particular circumstances and to market practice. Where appropriate, the Group will meet certain costs relating to Executive Director relocations. In the normal course of events, the Executive Directors’ salaries would not normally be increased by more than the average awarded to staff generally. However, given the need for a formal cap under the DRR regulations, the Remuneration Committee has further limited the maximum salary which it may award to £450,000 for the Executive Chairman, and for all other Executive Directors to the median salary level plus 10% for that role in the FTSE SmallCap. It is not possible to prescribe the likely change in the cost of insured beneﬁ ts or the cost of some of the other reported beneﬁ ts year-to-year, but the provision of beneﬁ ts will operate within an annual limit of £100,000 (plus a further 100% of base salary in the case of relocations). The Remuneration Committee will monitor the costs in practice and ensure that the overall costs do not increase by more than the Remuneration Committee considers appropriate in all the circumstances. Base salary This is the core element of pay and reﬂ ects the individual’s role and position within the Group with some adjustment to reﬂ ect their capability and contribution. Beneﬁ ts To provide beneﬁ ts valued by recipients. 48 Performance measures N/A N/A 49 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Policy continued Element and purpose Policy and operation Maximum Pension To provide retirement beneﬁ ts. Annual Incentive Plan (“AIP”) To motivate executives and incentivise delivery of performance over a one-year operating cycle, focusing on the short- to medium-term elements of our strategic aims. The maximum employer’s contribution is limited to 15% of base salary. The maximum level of AIP outcomes is 50% of base salary p.a. for the duration of this Policy. Executive Directors can receive pension contributions to personal pension arrangements, or if a Director is impacted by annual or lifetime limits on contribution levels to qualifying pension plans, the balance can be paid as a cash supplement. AIP levels and the appropriateness of measures are reviewed annually at the commencement of each ﬁ nancial year to ensure they continue to support our strategy. Once set, performance measures and targets will generally remain unchanged for the year, except to reﬂ ect events such as corporate acquisitions or other major transactions where the Remuneration Committee considers it to be necessary in its opinion to make appropriate adjustments. AIP outcomes are paid in cash following the determination of achievement against performance measures and targets. Malus and clawback provisions apply to the AIP as explained in more detail in the notes to this table. Performance measures N/A The performance measures applied may be ﬁ nancial or non-ﬁ nancial and corporate, divisional or individual and in such proportions as the Remuneration Committee considers appropriate. Details of the proposed performance measures for the year ending 30 April 2015 are set out in the notes to this table. Attaining the threshold level of performance for any measure will not produce a pay-out of more than 20% of the maximum portion of overall AIP attributable to that measure, with a sliding scale to full pay-out for maximum performance. However, the AIP remains a discretionary arrangement and the Remuneration Committee retains a standard power to apply its judgment to adjust the outcome of the AIP for any performance measure (from zero to any cap) should it consider that to be appropriate. 50 Strategic Report | Governance | Financial Statements Directors’ Remuneration Policy continued Element and purpose Policy and operation Maximum Long-Term Incentives (“LTI”) To motivate and incentivise delivery of sustained performance over the long-term, and to promote alignment with shareholders’ interests, the Group intends to operate a Performance Share Plan (“PSP”). Shareholders’ approval for the PSP is being sought at the 2014 AGM. The PSP allows for awards over shares with a maximum value of 150% of base salary per ﬁ nancial year. The Remuneration Committee expressly reserves discretion to make such awards as it considers appropriate within these limits. Awards under the PSP may be granted as nil-cost options or conditional awards of shares which vest to the extent performance conditions are satisﬁ ed over a period of at least three years. Under the PSP rules, vested awards may also be settled in cash. The PSP rules allow that the number of shares subject to vested PSP awards may be increased to reﬂ ect the value of dividends that would have been paid in respect of any dividend dates falling between the grant of awards and the vesting of awards. Whilst this feature will not operate for awards to be made in 2014, the Remuneration Committee retains discretion to introduce this feature during the period of this policy. Malus and clawback provisions apply to PSP awards and are explained in more detail in the notes to this table. Performance measures The Remuneration Committee may set such performance conditions on PSP awards as it considers appropriate (whether ﬁ nancial or non- ﬁ nancial and whether corporate, divisional or individual). Details of the proposed performance measures for the initial awards are set out in the notes to this table. Once set, performance measures and targets will generally remain unaltered unless events occur which, in the Remuneration Committee’s opinion, make it appropriate to substitute, vary or waive the performance conditions in such manner as the Remuneration Committee thinks ﬁ t. Performance periods may be over such periods as the Remuneration Committee selects at grant, which will not be less than (but may be longer than) 3 years. No more than 25% of awards vest for attaining the threshold level of performance conditions. Share Ownership Guidelines To further align the interests of Executive Directors with those of shareholders. Executive Directors are expected to retain all of the ordinary shares vesting under the PSP, after any disposals for the payment of applicable taxes, until they have achieved the required level of shareholding. 100% of salary for all Executive Directors. N/A The Remuneration Committee reserves the power to amend (but not reduce) these levels in future years. 51 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Policy continued Element and purpose Policy and operation Maximum Performance measures Consistent with normal practice, such awards are not subject to performance conditions. The Sharesave Plan is an all-employee share plan established under the HMRC tax-advantaged regime and follows the usual form for such plans. The exercise price of the options is usually equal to the market price of the shares at the date of invitation to participate less a maximum discount of 20%. Executive Directors are able to participate in all-employee share plans on the same terms as other Group employees. The maximum amount that can be invested in the plan will not exceed the statutory limit from time to time (currently £500 pcm). The options vest on the third anniversary of the commencement of the savings period. Fees are paid monthly in cash. N/A Any increases made will be appropriately disclosed. The fees paid to Non-Executive Directors aim to be competitive with other fully listed companies of equivalent size and complexity. The fees payable to the Non-Executive Directors are determined by the Board. Non-Executive Directors will not participate in any new share incentive arrangements from Admission, although commitments made under pre-Admission plans will continue to be honoured. All-employee share plans To encourage share ownership by employees, thereby allowing them to share in the long-term success of the Group and align their interests with those of the shareholders. Shareholders’ approval is being sought at the 2014 AGM for the Clipper Sharesave Plan (“Sharesave Plan”). Non-Executive Director fees To enable the Group to recruit and retain Non-Executive Directors of the highest calibre, at the appropriate cost. 52 Strategic Report | Governance | Financial Statements Directors’ Remuneration Policy continued Notes to the Policy table The Remuneration Committee selected 4. Stating maximum amounts for the 1. AIP performance measures to apply this performance condition as it provides a Remuneration Policy in the Financial Year to 30 April 2015 (for signiﬁ cant level of growth in earnings which is The DRR regulations and related investor information and not part of the Directors’ a key measure of success for the Group. guidance encourages companies to Remuneration Policy) disclose a cap within which each element The proposed performance measures 3. Malus and Clawback. of the Directors’ Remuneration Policy will and targets for the ﬁ nancial year to 30 Malus (being the forfeiture of unvested operate. Where maximum amounts for April 2015 will be based on Adjusted EBIT. awards) and clawback (being the ability elements of remuneration have been set The Remuneration Committee selected of the Company to claim repayment of within the Directors’ Remuneration Policy, Adjusted EBIT as the performance measure paid amounts as a debt) provisions apply these will operate simply as caps and are for the AIP for the year ending 30 April 2015 to the AIP and PSP if, in the opinion of the not indicative of any aspiration. as it is regarded as a key performance Remuneration Committee, any of the indicator for the Group and focuses on following has occurred: 5. Travel and hospitality the underlying operating proﬁ tability of the - There has been a material misstatement While the Remuneration Committee does business by removing non-recurring items. of the Group’s ﬁ nancial results which has not consider it to form part of beneﬁ ts in led to an overpayment; the normal usage of that term, it has been Given the competitive nature of the Group’s - The assessment of performance targets advised that corporate hospitality (whether sectors, the speciﬁ c performance targets for is based on an error or inaccurate or paid for by the Group or another company) the AIP are considered to be commercially misleading information or assumptions; and business travel for Directors (and sensitive and accordingly are not disclosed. - Circumstances warranting summary exceptionally their families) may technically Following the conclusion of the current dismissal in the relevant period; or come within the applicable rules and so the ﬁ nancial year, the Remuneration - Any other act or omission that has had Remuneration Committee expressly reserves Committee will consider whether it is a sufﬁ ciently signiﬁ cant impact on the the right for the Remuneration Committee feasible to disclose the performance reputation of the Group to justify the to authorise such activities within its agreed targets for the current ﬁ nancial year on operation of malus/clawback. policies. a retrospective basis. 2. Performance conditions for PSP awards plans may be subject to clawback for up remuneration for Directors from the policy in 2014 (for information and not part of to three years post payment or vesting as on remuneration of other employees Amounts in respect of awards under both 6. Differences between the policy on the Directors’ Remuneration Policy) appropriate. The ﬁ rst awards under the PSP are to be made shortly following the AGM, subject to the approval of the PSP by the Company’s shareholders. The performance measures and targets for the ﬁ rst PSP awards to be made in 2014 will be based on EPS performance for the ﬁ nancial year ending 30 April 2017, summarised as follows: EPS - Financial year ending 30 April 2017 PSP Award 12p 100% Where the Group’s pay policy for Directors differs to its pay policies for groups of employees’ this reﬂ ects the appropriate market rate position for the relevant roles. The Company takes into account pay levels, bonus opportunity and share awards applied across the Group as a whole when setting the Directors’ Remuneration Policy. Between 10p and 12p Pro-rata on straight-line basis between 25% and 100% 10p Less than 10p 25% 0% 53 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Policy continued Recruitment Remuneration Policy For an internal appointment, any variable All buy-outs, whether under the AIP, PSP or The Group’s recruitment Remuneration pay element awarded in respect of the otherwise, will take account of the service Policy aims to give the Remuneration prior role may either continue on its original obligations and performance requirements Committee sufﬁ cient ﬂ exibility to secure the terms or be adjusted to reﬂ ect the new for any remuneration relinquished by appointment and promotion of high-calibre appointment as appropriate. the individual when leaving a previous executives to strengthen the management employer. The Remuneration Committee team and secure the skill sets to deliver our For external and internal appointments, the will seek to make buy-outs subject to strategic aims. Remuneration Committee may agree that what are, in its opinion, comparable the Company will meet certain relocation requirements in respect of service and In terms of the principles for setting a expenses as it considers appropriate. performance. However, the Remuneration package for a new Executive Director, Committee may choose to relax this the starting point for the Remuneration For external candidates, it may be requirement in certain cases (such as Committee will be to apply the general necessary to make additional awards or where the service and/or performance Directors’ Remuneration Policy for Executive to buy-out awards forfeited by the individual requirements are materially completed, Directors as set out above and structure a on leaving a previous employer. or where such factors are, in the view of package in accordance with that Policy. For the avoidance of doubt, buy-out the Remuneration Committee, reﬂ ected Consistent with the DRR regulations, the awards are not subject to a formal cap. in some other way, such as a signiﬁ cant caps contained within the Policy for ﬁ xed Details of any recruitment-related or buy-out discount to the face value of the awards pay do not apply to new recruits, although awards will be appropriately disclosed. forfeited) and where the Remuneration the Remuneration Committee would not Committee considers it to be in the envisage exceeding these caps in practice. For any buy-outs the Company will not interests of shareholders. pay more than is, in the view of the The AIP and PSP will operate (including Remuneration Committee, necessary and A new Non-Executive Director would the maximum award levels) as detailed will in all cases seek, in the ﬁ rst instance, to be recruited on the terms explained in the general policy in relation to any deliver any such awards under the terms of above in respect of the main policy newly appointed Executive Director. the existing AIP and PSP. It may, however, be for such Directors. necessary in some cases to make buy-out awards on terms that are more bespoke than the existing AIP and PSP. 54 55 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Policy continued Service contracts Executive Directors Non-Executive Directors The Remuneration Committee’s policy Each Non-Executive Director is engaged is that each Executive Director’s service for an initial period of three years. agreement should be of indeﬁ nite duration, These appointments can be renewed subject to termination by the Company following the initial three year term. These or the individual on 12 months’ notice. engagements can be terminated by either The service agreements of all Executive party on three months’ notice. Directors comply with that policy. The service agreements reserve the right for The Non-Executive Directors cannot the Company to make a payment in participate in the Company’s share lieu of notice to an Executive Director for schemes from Admission, are not entitled the amount of base salary plus beneﬁ ts to any pension beneﬁ ts and are not entitled for the notice period. Such sums may to any payment in compensation for early be paid in instalments and would cease termination of their appointment. if the individual ﬁ nds an alternative role. Contracts do not contain change of For each Non-Executive Director the control provisions. effective date of their latest letter of appointment is: The Remuneration Committee reserves Paul Hampden Smith 16 May 2014 ﬂ exibility to alter these principles if necessary Stephen Robertson 16 May 2014 to secure the recruitment of an appropriate Ron Series candidate and, if appropriate, introduce a Mike Russell 16 May 2014 16 May 2014 longer initial notice period (of up to 2 years) reducing over time. The date of each Executive Director’s contract is: Steve Parkin Tony Mannix David Hodkin Sean Fahey 30 May 2014 30 May 2014 30 May 2014 30 May 2014 56 Strategic Report | Governance | Financial Statements Directors’ Remuneration Policy continued Termination policy summary It is appropriate for the Remuneration termination and any treatments that the Committee to consider treatments on Remuneration Committee may choose to a termination having regard to all of the apply under the discretions available to it relevant facts and circumstances available under the terms of the AIP and PSP plans. at that time. This policy applies both to any The potential treatments on termination negotiations linked to notice periods on a under these plans are summarised below: Incentives Annual Incentive Plan (“AIP”) Performance Share Plan If a leaver is deemed to be a ‘good leaver’; for example, leaving through death or otherwise at the discretion of the Remuneration Committee Remuneration Committee has discretion to determine AIP awards. Will receive a pro-rated award subject to the application of the performance conditions at the end of the normal performance period. Remuneration Committee retains standard discretions to either vary time pro-rating or to allow vesting at the date of cessation (determining the performance conditions at that time). If a leaver is deemed to be a ‘bad leaver’; for example, leaving for disciplinary reasons or to join a competitor Other exceptional cases; e.g. change in control No awards made. All awards will normally lapse. Remuneration Committee has discretion to determine AIP awards. Will receive a pro-rated award subject to the application of the performance conditions at the date of the event, subject to standard Remuneration Committee discretions to vary time pro-rating. External appointments regular updates on overall pay and Statement of consideration None of the Executive Directors serve conditions in the Group, including (but not of shareholder views as Non-Executive Directors on any limited to) changes in base pay and any The 2014 AGM is the ﬁ rst occasion on external boards. staff bonus pools in operation. There will also which the Company will seek the support be oversight of the all-employee Sharesave of its shareholders for matters relating to scheme which Executive Directors and all the remuneration of Executive Directors. Statement of consideration of other Group employees can participate in The Remuneration Committee will ensure employment conditions elsewhere in on the same terms and conditions. that it considers all of the feedback which it the Group receives from its shareholders during Pay and employment conditions generally The Company did not consult with this process. in the Group are taken into account when employees in drawing up this setting Executive Directors’ remuneration. Remuneration Report. The Remuneration Committee receives 57 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Remuneration Policy continued Illustrations of application of remuneration policy Long-term Incentives Annual Incentive Plan Total Fixed Pay Long-term Incentives Annual Incentive Plan Total Fixed Pay £1,091 35% 18% £706 13% 16% £483 100% 71% 47% £271 £609 37% 18% £395 15% 17% 100% 68% 44% Minimum In line with expectation Maximum Minimum In line with expectation Maximum Executive Chairman - Steve Parkin CEO - Tony Mannix £479 38% 19% £308 15% 18% £208 £399 38% 19% £257 15% 17% £173 100% 67% 43% 100% 68% 43% Minimum In line with expectation Maximum Minimum In line with expectation Maximum CFO - David Hodkin CIO - Sean Fahey £1,200 £1,000 £800 £600 £400 £200 £600 £500 £400 £300 £200 £100 0 0 0 £ ’ 0 0 0 £ ’ 58 Strategic Report | Governance | Financial Statements Directors’ Remuneration Policy continued The charts on the previous page aim to show how the Remuneration Policy set out above for Executive Directors is applied using the following assumptions: - Consists of base salary, beneﬁ ts and pension. - Base salary is the salary to be paid in the year ending 30 April 2015. - Value of the ongoing beneﬁ ts received in the year ending 30 April 2014. - Pension measured as the deﬁ ned contribution or cash allowance in lieu of Company contributions, as a percentage of salary (6% for Steve Parkin, 10% for Tony Mannix and Sean Fahey, 15% in the case of David Hodkin). Minimum £’000 Steve Parkin Tony Mannix David Hodkin Sean Fahey Base Salary 405 225 180 150 Beneﬁ ts 54 23 1 8 Pension 24 Total Fixed 483 23 27 15 271 208 173 Based on what the Director would receive if performance was on-target (excl. share price appreciation and dividends): - STI: consists of 60% of maximum opportunity by attaining In line with expectations on-target performance. - LTI: consists of the threshold level of vesting (25% vesting), plus the fair value of full investment in the Sharesave scheme (£1,200) for all Directors other than Steve Parkin. Based on the maximum remuneration receivable (excl. share price appreciation and dividends): - STI: consists of maximum bonus of 50% of base salary. - LTI: consists of the face value of awards (100% of salary), plus the fair value of full investment in the Sharesave scheme (£1,200) for all Directors other than Steve Parkin. Maximum 59 Clipper Logistics plc Annual Report and Accounts 2014 Implementation Report on Remuneration Audited Information Single Figure Table Salary year ended 30 April: Beneﬁ ts year ended 30 April: Annual bonus year ended 30 April: Long-term incentives year ended 30 April: Pension contributions year ended 30 April: Total year ended 30 April: £’000 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 Steve Parkin 380 255 120 104 Tony Mannix 177 177 David Hodkin 157 150 Sean Fahey 150 150 24 1 23 23 1 22 - - - - - 10 10 10 n/a n/a n/a n/a n/a n/a n/a n/a 15 36 23 15 15 36 23 15 515 374 237 246 181 184 188 197 1 Beneﬁ ts comprise of a car allowance or company car, fuel allowance, private family medical cover, insurance beneﬁ ts and loans. All Director loan accounts were repaid by 30 April 2014. 2 No bonus was paid in the year ended 30 April 2014. This decision was made following consideration of the process towards IPO. For details of the performance measures and targets for the ﬁ nancial year ending 30 April 2015, refer to the Notes to the Policy table. 4 David Hodkin’s pension entitlement is paid by way of an additional allowance, taxed as salary. 3 No LTIP was in operation for the ﬁ nancial years ended 30 April 2014 and 30 April 2013. For details of the LTIP in operation for the ﬁ nancial year ending 30 April 2015 refer to the Directors’ Remuneration Policy. 5 The above table excludes remuneration of Executive Directors who resigned prior to the IPO. Their remuneration is included in the totals shown in note 5 to the Financial Statements. Non-Executive Directors’ Fees Fees year ended 30 April: Beneﬁ ts year ended 30 April: Total year ended 30 April: £’000 2014 2013 2014 2013 2014 2013 Mike Russell 25 28 - - 25 28 1 Mike Russell was a Non-Executive Director of the former parent company for both the year ended 30 April 2013 and 30 April 2014, and his remuneration was paid by the Company. Since the 30 April 2014 year end, the Company has appointed three additional Non-Executive Directors, whose fee details are set out in the Implementation of Policy in the year to 30 April 2015 section. 60 Strategic Report | Governance | Financial Statements Implementation Report Implementation Report on Remuneration on Remuneration continued Directors’ Interests The interests (all being beneﬁ cial) immediately following Admission and completion of the Pre-Admission Reorganisation of the Directors in the Company’s securities are set out below: Steve Parkin Tony Mannix David Hodkin Sean Fahey Paul Hampden Smith Stephen Robertson Ron Series Mike Russell Ordinary Shares 34,797,100 1,358,613 1,358,613 7,834,397 100,000 - - - 1 All shares are wholly owned by Directors or connected persons (i.e. none are subject to performance conditions and none are previously vested but as of yet unexercised share options). 61 Clipper Logistics plc Annual Report and Accounts 2014 Implementation Report on Remuneration continued Unaudited Information Remuneration Committee Advisors In anticipation of Admission, the FIT Remuneration Consultants LLP, signatories Company established the Remuneration to the Remuneration Consultants Group’s Committee. The members of the Code of Conduct, were appointed by Remuneration Committee are: the Remuneration Committee following a - Mike Russell (Chairman); - Paul Hampden Smith; and - Ron Series. competitive tender process. FIT provides advice to the Remuneration Committee on all matters relating to remuneration, including best practice. FIT provided The Remuneration Committee’s principal no other services to the Group and responsibilities are: accordingly the Remuneration Committee - recommending to the Board the was satisﬁ ed that the advice provided by remuneration strategy and framework FIT was objective and independent. FIT’s for the Executive Directors and senior fees in respect of the year ended 30 April managers; 2014 were £37,000 (ex VAT). FIT’s fees were - determining, within that framework, the charged on the basis of the ﬁ rm’s standard individual remuneration arrangements terms of business for advice provided. for the Executive Directors and senior managers; and - overseeing any major changes in employee beneﬁ t structures throughout the Group. The Executive Chairman is invited to attend meetings of the Remuneration Committee, except when his own remuneration is being discussed, and the Chief Financial Ofﬁ cer and other Executives attend meetings as required. 62 Strategic Report | Governance | Financial Statements Implementation Report on Remuneration continued Implementation of Policy in the year ended 30 April 2015 Executive Directors Base Salary Non-Executive Directors Fees - Base salaries from Admission were - The base fee payable to each as follows: £405,000 for Steve Parkin, Non-Executive Director is as follows: £225,000 for Tony Mannix, £180,000 Paul Hampden Smith (Senior Independent for David Hodkin and £150,000 for Director and Chair of the Audit Committee) - £60,000; Stephen Robertson - £40,000; Ron Series - £40,000; Mike Russell - £40,000. Sean Fahey. Pension - Contribution rates for Executive Directors are as follows (expressed as percentages of base salary): Steve Parkin - 6%, Tony Mannix - 10%, David Hodkin - 15%. Sean Fahey - 10%. Beneﬁ ts - Details of the beneﬁ ts received by Executive Directors are set out in note 1 to the single ﬁ gure table on page 60. - There is no intention to introduce additional beneﬁ ts in 2014. Annual Incentive Plan for the year to 30 April 2014 - No bonuses were paid for the year to 30 April 2014. Annual Incentive Plan for the year to 30 April 2015 - The AIP maximum is 50% of base salary. - Performance measures for the AIP in the year to 30 April 2015 are summarised in note 1 in Notes to the Policy Table. Performance Share Plan in the year to 30 April 2015 - Award levels are proposed at 100% of base salary for each Executive Director. - The performance measures and targets for this award are described in note 2 in Notes to the Policy Table. 63 Clipper Logistics plc Annual Report and Accounts 2014 Implementation Report on Remuneration continued Unaudited Information Relative importance of spend on pay The Company was Admitted on 4 June 2014 and no distributions have been made to shareholders since that date. The dividend paid by the Company during the year to 30 April 2014 was to the Company’s former parent, therefore comparison of proﬁ t distributed by way of dividend to overall expenditure on pay is invalidated for the years to 30 April 2013 and 30 April 2014. 64 Strategic Report | Governance | Financial Statements Implementation Report on Remuneration continued Comparative Total Shareholder Admission to the 30 April 2015 ﬁ nancial Return (“TSR”) year end. The DRR regulations require a line graph showing the TSR on a holding of shares The DRR regulations also require a in the Company since Admission to the table setting out selected details of the ﬁ nancial year end following Admission, as remuneration of the Executive Chairman well as the TSR for a hypothetical holding over the same period as shown on the TSR of shares in a broad equity market index graph. Although, as mentioned above, for the same period. As Clipper listed after Clipper listed after the ﬁ nancial year end, the 30 April 2014 ﬁ nancial year end, it is not we have still included the details required by possible to create this graph for this year’s the DRR regulations for the last 2 ﬁ nancial Annual Report. Next year’s Annual Report years as shown in the table below. will include this graph over the period from Single ﬁ gure of total remuneration (£’000) Annual variable element award rates against maximum opportunity Long term incentive vesting rates against maximum opportunity Year ended 30 April 2014: Steve Parkin Year ended 30 April 2013: Steve Parkin 515 374 0% 0% n/a n/a Executive Chairman’s relative pay In accordance with the DRR regulations, we outcome) of the Executive Chairman and present in the table below the percentage the average percentage change for all change in the prescribed pay elements Group staff between the year ended 30 April (salary, taxable beneﬁ ts, and annual bonus 2013 and the year ended 30 April 2014. Year-on-year % change Salary Taxable Beneﬁ ts Annual Bonus Executive Chairman All-employees 49% 2% 15% 1% 0% 0% AGM voting results As the Company has only recently listed, This report was reviewed and approved by there has not yet been an Annual General the Board on 28 August 2014 and signed on Meeting (“AGM”) where a resolution to pass its behalf by order of the Board. each of the Directors’ Remuneration Policy and Directors’ Remuneration Report has Mike Russell been put forward for voting. In next year’s Chairman, Remuneration Committee Annual Report this section will have the voting breakdown of those two resolutions from this year’s AGM. 65 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Report The Directors are pleased to present the In addition, note 2.24 to the Financial Directors’ share interests ﬁ rst Annual Report and consolidated Statements includes the Group’s objectives, Particulars of the number of Ordinary Shares Financial Statements of Clipper Logistics plc policies and processes for capital and of the Company in which the Directors were for the year ended 30 April 2014. ﬁ nancial risk management, including beneﬁ cially interested immediately following The Corporate Governance Report on market risk, including foreign currency, Directors’ Remuneration Report on page 61. information on the Group’s exposures to Admission on 4 June 2014 are set out in the pages 34 to 37 and the Corporate commodity price, interest rate, inﬂ ation Social Responsibility Report (with regard and equity price risks; details of its ﬁ nancial to information about the employment of instruments and hedging activities; and its Directors’ indemnities disabled persons, employee involvement exposures to credit risk and liquidity risk. The Articles permit the Board to grant the and greenhouse gas emissions) are also incorporated into this report by reference. Results and dividends Directors indemnities in relation to their duties as Directors, including third party indemnity provisions (within the meaning The Company has chosen, in accordance Results for the year are set out in the of the Companies Act) in respect of any with section 414C (11) of the Companies Group Income Statement on page 76. liabilities incurred by them in connection Act 2006 to include the disclosure of likely with any negligence, default, breach of future developments in the Strategic Report The Directors are not recommending the duty or breach of trust in relation to the (see pages 4 to 29). payment of any ﬁ nal dividend in respect of Company. No such indemnities have to the year ended 30 April 2014. date been granted. Financial risk management An interim dividend of £2.5 million was paid The Group’s business activities, together to the Group’s former parent company on Compensation for loss of ofﬁ ce with the factors likely to affect its future 28 June 2013. Further distributions by the There are no agreements between the development, performance and position Group in the year are set out in note 8 to the Company and its Directors or employees are set out in the Operational and Financial Financial Statements. Review on pages 18 to 25, along with the ﬁ nancial position of the Group, its cash ﬂ ows and liquidity. Directors providing for compensation for loss of ofﬁ ce or employment that occurs as a result of a takeover bid. Further details of the Directors’ service contracts can be found in the The names and biographies of the current Directors’ Remuneration Report on pages Directors of the Company are set out on 44 to 65. pages 32 and 33 of this Annual Report. The following Directors are current Directors or served the Company during the year ended 30 April 2014: Name Position Notes Steven (Steve) Nicholas Parkin Antony (Tony) Gerard Mannix David Arthur Hodkin Sean Eugene Fahey Michael (Mike) David Badrock Nigel John Hinds Paul Nigel Hampden Smith Stephen Peter Robertson Ronald (Ron) Charles Series Michael (Mike) John Russell 66 Executive Chairman Chief Executive Ofﬁ cer Chief Financial Ofﬁ cer Chief Information Ofﬁ cer Non-Executive Director Operations Director Senior Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director - - - - Resigned 13 May 2014 Resigned 13 May 2014 Appointed 16 May 2014 Appointed 16 May 2014 Appointed 16 May 2014 Appointed 16 May 2014 Strategic Report | Governance | Financial Statements Directors’ Report continued Directors’ and Ofﬁ cers’ liability insurance person or by proxy shall have one vote for Restrictions on the transfer of shares Directors’ and Ofﬁ cers’ Liability Insurance every share of which he is the holder. The There are no restrictions on the transfer of cover is in place at the date of this report, Notice of Annual General Meeting speciﬁ es the Ordinary Shares other than: having been purchased prior to the IPO. The deadlines for exercising voting rights and - the standard restrictions for a UK-quoted Board remains satisﬁ ed that an appropriate appointing a proxy or proxies. company where any amount is unpaid on level of cover is in place and a review of cover will take place on an annual basis. a share; - where, from time to time, certain Deadlines for exercising voting rights restrictions may become imposed by attaching to shares laws and regulations (for example, insider Articles of Association The Articles provide a deadline for the trading laws and marketing requirements The Articles of Association (adopted by submission of proxy forms (whether by relating to close periods); and special resolution on 15 May 2014) may an instrument in writing or electronically) only be amended by special resolution of of not less than 48 hours before the time - pursuant to the Listing Rules of the the shareholders. A copy of the Articles is appointed for the holding of the meeting or Financial Conduct Authority whereby available on request from the Company the adjourned meeting. Secretary. certain Directors, ofﬁ cers or employees of the Company require the approval of the Company to deal in the Ordinary Shares. Shares in uncertiﬁ cated form Change of name Directors may determine that shares may On 30 May 2014, the Company entered On 14 May 2014 the Company changed be held in uncertiﬁ cated form and title to into a placing agreement with, amongst its name from Clipper Logistics Group Ltd to such shares may be transferred by means others, the Directors, certain selling Clipper Logistics Ltd, and on 15 May 2014 of a relevant system or that shares should shareholders and Numis Securities Ltd re-registered as a plc. cease to be so held and transferred. (“Numis”) in accordance with which subject to certain customary exceptions: - the Company has agreed not to dispose Share capital structure Variation of rights attaching to shares of any Ordinary Shares in the Company Details of the Company’s share capital are The Articles provide that rights attached for a period of 365 days following the set out in note 22 to the Financial Statements to any class of shares may be varied with date of Admission without the prior written on page 116. The Company has a single the written consent of the holders of not consent of Numis; and class of share capital divided into Ordinary less than three-quarters in nominal value Shares of 0.05p each. The Ordinary Shares of the issued shares, or with the sanction of - the Directors and those selling are listed on the London Stock Exchange. a special resolution passed at a separate shareholders who have retained Ordinary The rights and obligations attaching to these general meeting of the holders of those Shares after Admission have agreed shares are governed by UK law and the shares. At every such separate general not to dispose of any Ordinary Shares in Company’s Articles of Association. meeting, the quorum shall be 2 persons the Company for a period of 365 days holding or representing by proxy at least following the date of Admission without one-third in nominal value of the issued the prior written consent of Numis. Voting rights attaching to shares shares (calculated excluding any shares Ordinary shareholders are entitled to receive held in treasury). The rights conferred upon notice and to attend and speak at any the holders of any shares shall not, unless general meeting of the Company. On a otherwise expressly provided in the rights show of hands every shareholder present in attaching to those shares, be deemed to person or by proxy (or being a corporation be varied by the creation or issue of further represented by a duly authorised shares ranking pari passu with them. representative) shall have one vote, and on a poll every shareholder who is present in 67 Clipper Logistics plc Annual Report and Accounts 2014 Directors’ Report continued On 30th May 2014 the Executive Directors at each AGM, one-third of the Directors Greenhouse gas emissions and certain persons who held Ordinary for the time being (or, if their number is not The Group’s disclosures on greenhouse gas Shares after the Company’s Admission a multiple of 3, then the number nearest emissions can be found in the CSR section or whose associates held such shares to but not exceeding one-third) shall retire of the Strategic Review on page 28 and entered into an agreement pursuant to from ofﬁ ce. A Director who retires at any form part of the Directors’ Report. which they (other than Steve Parkin) each AGM shall be eligible for re-appointment. agreed with Mr Parkin that, subject to certain In addition, any Director appointed by the usual exceptions, each of them would Board shall hold ofﬁ ce only until the next Employment Policies not dispose of shares which in aggregate following AGM and shall then be eligible for Arrangements for consulting and involving equated to: appointment. - more than one third of his shares (as held Group employees on matters affecting their interests at work, and informing them immediately following listing) at any time On 30th May 2014 the Company of the performance of their employing during the period commencing on the entered into an agreement (“Relationship business and the Group, are developed date of Admission and ending on the Agreement”) with Steve Parkin and in ways appropriate to each business. A fourth anniversary of that date; and his nominee company Carlton variety of approaches is adopted aimed Court Investments Ltd (the “Principal at encouraging the involvement of - the balance of any of such shares not Shareholders”). Pursuant to that agreement employees in effective communication otherwise disposed of in the ﬁ rst period the Company has agreed with the Principal and consultation, and the contribution of between the date commencing on the Shareholders that the Principal Shareholders productive ideas at all levels. ﬁ rst anniversary of Admission and the ﬁ fth shall be entitled to appoint and remove one anniversary of Admission. Director to the Board so long as the Principal Employment policies are designed to Shareholders (and/or any of their associates) provide equal opportunities irrespective when taken together, hold 25% or more of of race, caste, national origin, religion, Authority to purchase own shares the voting rights over the Company’s issued age, disability, gender, marital status, A resolution to authorise the Directors to shares. Where any Principal Shareholder sexual orientation or political afﬁ liation. purchase up to 10% of the Company’s has already been nominated to the board Group policy is to ensure that disabled issued Ordinary Share capital will be as a Director himself such appointment applicants for employment are given proposed at the 2014 AGM. will reduce the number of persons which full and fair consideration having regard the Principal Shareholders are entitled to their particular aptitudes and abilities, As at 26 August 2014, being the latest to nominate for appointment by one. and that existing disabled employees are practicable date prior to the publication of Any person appointed by the Principal given equal access to training, career this report, the Company did not hold any Shareholders to the board may be removed development and promotion opportunities. shares in treasury. by the Principal Shareholders by notice In the event of existing employees in writing. Appointment and replacement of Directors Power of Directors becoming disabled, all reasonable means would be explored to achieve retention in employment in the same or an alternative capacity, including arranging appropriate Unless determined by ordinary resolution Subject to the Articles, the Companies training. Further details in relation to the of the Company, the number of Directors Act and any directions given by special Group’s employment policy is set out in shall not be less than 2 or more than 12 in resolution, the business of the Company the CSR section of the Strategic Report on number. A Director is not required to hold shall be managed by the Board who may page 28. any shares in the Company by way of exercise all the powers of the Company qualiﬁ cation. to, for example, borrow money; mortgage or charge any of its undertaking, property Political donations The Board may appoint any person to be and uncalled capital; and issue debentures The Company has made no political a Director and such Director shall hold and other securities, whether outright or as donations since Admission on 4 June 2014 ofﬁ ce only until the next AGM, when he or collateral security for any debt, liability or and intends to continue its policy of not she shall be eligible for appointment by obligation of the Company. doing so for the foreseeable future. the shareholders. The articles provide that 68 Strategic Report | Governance | Financial Statements Directors’ Report continued Major interests in shares As at 5 August 2014, the Company had been advised, in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, of the following notiﬁ able interests (whether directly or indirectly held) in 3% or more of its voting rights: Notiﬁ cation received from Number of voting rights % Carlton Court Investments Ltd1 SOMLIE Ltd2 The Chima Settlement Unicorn Asset Management Liontrust Asset Management Legal and General Investment Management Artemis Investment Management Schroder Investment Management SFM UK Management River and Mercantile Asset Management F&C Asset Management 1 Ultimately controlled by Steve Parkin, Executive Chairman. 2 Nominee for Sean Fahey, Chief Information Ofﬁ cer. 34,797,100 7,834,397 6,999,999 6,290,000 5,360,188 4,085,000 3,865,984 3,675,000 3,250,000 3,015,000 3,000,000 34.80 7.83 7.00 6.29 5.36 4.09 3.87 3.68 3.25 3.02 3.00 Going concern - he has taken all the reasonable steps The Directors consider that all of the After making enquiries, the Directors have a that he ought to have taken as a Director proposed resolutions are in the best interests reasonable expectation that the Company to make himself aware of any relevant of the Company and its shareholders as a has adequate resources to continue in audit information and to establish that whole. It is the Directors’ recommendation operational existence for the foreseeable the Group’s auditors are aware of the that you support the proposed resolutions future. In making this assessment they have information. and vote in favour of them, as each of the considered the Company and Group Directors intends to do. budgets and cash ﬂ ow forecasts for the The conﬁ rmation is given and should period to 30 April 2016. The Company has be interpreted in accordance with the The Directors’ Report has been approved considerable ﬁ nancial resources, negligible provisions of section 418 of the by the Board of Directors of Clipper liquidity risk and is operating within a sector Companies Act 2006. Logistics plc. that is experiencing growing demand for its services. The Directors therefore Signed on behalf of the Board. have a reasonable expectation that the Auditors Company and the Group have adequate The auditors, Ernst & Young LLP have resources to continue in operational indicated their willingness to continue in Paul White existence for the foreseeable future. Thus ofﬁ ce and a resolution seeking to reappoint Company Secretary they continue to adopt the going concern them will be proposed at the Annual 28 August 2014 basis of accounting in preparing the annual General Meeting. Financial Statements. Annual general meeting Clipper Logistics plc Registered Ofﬁ ce: Gelderd Road Audit information The Company’s Annual General Meeting Leeds Each of the Directors at the date of the will be held at Clipper Logistics, Gelderd LS12 6LT approval of this report conﬁ rms that: Road, Leeds, LS12 6LT on 29 September - so far as he is aware, there is no relevant 2014 at 11:00. Details of the meeting venue Company No. 03042024 audit information of which the Group’s and the resolutions to be proposed are set auditors are unaware; and out in a separate Notice of Meeting which accompanies the Annual Report. 69 Clipper Logistics plc Annual Report and Accounts 2014 Statement of Directors’ Responsibilities in respect of the Annual Report and the Group Financial Statements The Directors are responsible for The Directors are responsible for keeping Directors’ Responsibility Statement preparing the Annual Report and the adequate accounting records that are Each of the Directors, whose names and Group Financial Statements in accordance sufﬁ cient to show and explain the Group’s functions are listed on pages 32 and 33 with applicable law and regulations. transactions and disclose with reasonable conﬁrm that, to the best of their knowledge: accuracy at any time the ﬁ nancial position - the Financial Statements, prepared in Company law requires the Directors to of the Group and enable them to ensure accordance with IFRS as adopted by the prepare ﬁ nancial statements for each that its Financial Statements comply with European Union, give a true and fair view ﬁ nancial year. Under that law they are the Companies Act 2006 and Article 4 of of the assets, liabilities, ﬁ nancial position required to prepare the Group’s Financial the IAS Regulation. They are also responsible and proﬁ t or loss of the Group; Statements in accordance with International for safeguarding the assets of the Group - the Strategic Report and Directors’ Report Financial Reporting Standards (IFRS) as and hence for taking reasonable steps for include a fair review of the development adopted by the European Union. the prevention and detection of fraud and and performance of the business and Under company law the Directors must not other irregularities. the position of the Group, together with a description of the principal risks and approve the Financial Statements unless The Directors are also responsible for uncertainties that they face; and they are satisﬁ ed that they give a true and preparing a Strategic Report, Directors’ - the Annual Report and Financial fair view of the state of affairs of the Group Report, Directors’ Remuneration Report, Statements, taken as a whole, is fair, and of the proﬁ t or loss of the Group for Audit Committee Report and Corporate balanced, and understandable and that period. In preparing these Financial Governance Statement in accordance with provides the information necessary Statements, the Directors are required to: the Companies Act 2006 and applicable for shareholders to assess the Group’s - select suitable accounting policies and regulations, including the requirements performance, business model then apply them consistently; of the of Listing Rules and Disclosure and and strategy. - make judgements and accounting Transparency Rules. estimates that are reasonable and Approved by the Board and signed prudent; The Directors are responsible for the on its behalf by: - state whether applicable IFRSs as maintenance and integrity of the corporate adopted by the European Union have and ﬁ nancial information included on Steve Parkin been followed, subject to any material the Company’s website. Legislation in Executive Chairman departures disclosed and explained in the the UK governing the preparation and 28 August 2014 Financial Statements; dissemination of ﬁ nancial statements may - present information, including differ from legislation in other jurisdictions. David Hodkin Chief Financial Ofﬁ cer 28 August 2014 accounting policies, in a manner that provides relevant, reliable, comparable information; - provide additional disclosures when compliance with the speciﬁ c requirements of IFRS is insufﬁ cient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s ﬁ nancial position and performance; and - prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. 70 71 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Annual Report and Accounts 2014 Group Financial Statements for the year ended 30 April 2014 72 73 Clipper Logistics plc Annual Report and Accounts 2014 Independent Auditor’s Report - Group Independent auditor’s report to the members of Clipper Logistics plc Opinion on the Group Financial Statements preparation of the Group Financial Statements - Revenue recognition, speciﬁ cally to ensure and for being satisﬁ ed that they give a true in the ﬁ rst year as Group auditor that In our opinion the Group Financial Statements: and fair view. appropriate revenue recognition policies - give a true and fair view of the state of the were applied; Group’s affairs as at 30 April 2014 and of its Our responsibility is to audit and express an - Accounting for the reorganisation of the proﬁ t for the year then ended; opinion on the Group Financial Statements Group; and - have been properly prepared in in accordance with applicable law and - Classiﬁ cation of certain head ofﬁ ce costs accordance with International Financial International Standards on Auditing (UK and as discontinuing costs. Reporting Standards (‘IFRSs’) as adopted by Ireland). Those standards require us to comply the European Union; and with the Auditing Practices Board’s Ethical - have been prepared in accordance with Standards for Auditors. Our application of materiality the requirements of the Companies Act 2006 and article 4 of the IAS regulation. We apply the concept of materiality both in planning and performing our audit, and in Scope of the audit of the Financial evaluating the effect of misstatements on Statements our audit and on the Financial Statements. What we have audited An audit involves obtaining evidence about For the purposes of determining whether the We have audited the Group Financial the amounts and disclosures in the ﬁ nancial Financial Statements are free from material Statements of Clipper Logistics plc for the statements sufﬁ cient to give reasonable misstatement we deﬁ ne materiality as the year ended 30 April 2014 which comprise assurance that the ﬁ nancial statements are magnitude of misstatement that makes it the Group Income Statement and Statement free from material misstatement, whether probable that the economic decisions of a of Comprehensive Income, the Group caused by fraud or error. This includes an reasonably knowledgeable person, relying on Statement of Financial Position, the Group assessment of: whether the accounting the Financial Statements, would be changed Statement of Changes in Equity, the Group policies are appropriate to the Group’s or inﬂ uenced. Statement of Cash Flows, and the related circumstances and have been consistently notes 1 to 30. The ﬁ nancial reporting applied and adequately disclosed; the We determined materiality for the Group to framework that has been applied in their reasonableness of signiﬁ cant accounting be £0.3 million, which is approximately 5% preparation is applicable law and IFRSs as estimates made by the Directors; and of pre-tax proﬁ t for the year, adjusted for adopted by the European Union. the overall presentation of the Financial exceptional items. This provided a basis for Statements. In addition, we read all the determining the nature, timing and extent of This report is made solely to the Company’s ﬁ nancial and non-ﬁ nancial information risk assessment procedures, identifying and members, as a body, in accordance with in the Annual Report to identify material assessing the risk of material misstatement Chapter 3 of part 16 of the Companies Act inconsistencies with the audited Financial and determining the nature, timing and extent 2006. Our audit work has been undertaken Statements and to identify any information of further audit procedures. so that we might state to the Company’s that is apparently materially incorrect based members those matters we are required on, or materially inconsistent with, the On the basis of our risk assessments, together to state to them in an auditor’s report and knowledge acquired by us in the course of with our assessment of the Group’s overall for no other purpose. To the fullest extent performing the audit. If we become aware control environment, our judgement is that permitted by law, we do not accept or of any apparent material misstatements or performance materiality (that is our tolerance assume responsibility to anyone other than the inconsistencies we consider the implications for misstatement in an individual account or Company and the Company’s members as for our report. a body, for our audit work, for this report, or for the opinions we have formed. balance) was 50% of our materiality, namely £0.15 million. Our objective in adopting this approach was to ensure that uncorrected Our assessment of risks of material and undetected audit differences in the misstatement Financial Statements as a whole did not Respective responsibilities of Directors We identiﬁ ed the following risks that we exceed our planning materiality level. and auditor believed would have the greatest impact on As explained more fully in the Statement of our overall audit strategy; the allocation of We agreed with the Audit Committee that we Directors’ Responsibilities set out on page resources in the audit; and directing the efforts would report to the Committee all corrected 70, the Directors are responsible for the of the engagement team: and uncorrected audit differences in excess 74 Strategic Report | Governance | Financial Statements Independent Auditor’s Report - Group continued of £15,000, as well as differences below that of revenue. We undertook cut-off testing - materially inconsistent with the information in threshold that in our view warranted reporting at each operating unit. We tested revenue the audited Financial Statements; or on qualitative grounds. journal entries recorded in the general ledger - apparently materially incorrect based on, or and evaluated the rationale for unusual materially inconsistent with, our knowledge items where required. We also ensured of the Group acquired in the course of An overview of the scope of our audit that management’s policies for revenue performing our audit; or We adopted a risk-based approach in recognition and the Financial Statement - is otherwise misleading. determining our audit strategy. This approach disclosures were in accordance with focuses audit effort towards higher risk accounting standards. In particular, we are required to consider areas, such as management judgements whether we have identiﬁ ed any inconsistencies and estimates and operating units that are (b) Accounting for the reorganisation between our knowledge acquired during considered signiﬁ cant based upon size, of the Group the audit and the Directors’ Responsibility complexity and risk. Our Group audit scope We challenged management in respect of Statement that they consider the Annual focused on two operating units, which were the basis of accounting used in accounting for Report is fair, balanced and understandable subject to a full scope audit for the year the reorganisation and the applicability of the and whether the Annual Report ended 30 April 2014 performed by the basis selected. Group audit team. An additional operating appropriately discloses those matters that we communicated to the Audit Committee which unit was selected for speciﬁ c scope audit We have audited key evidence of the we consider should have been disclosed. procedures where the extent of audit work transaction that gave rise to the reorganisation, was based on our assessment of the risks of and agreed the treatment in the consolidation Under the Companies Act 2006 we are material misstatement and of the materiality and the related Financial Statement disclosures. required to report to you if, in our opinion: of those operating units to the Group’s business - certain disclosures of Directors’ remuneration operations. Together with the Group functions (c) Classiﬁ cation of certain head ofﬁ ce speciﬁ ed by law are not made; or which were also subject to a full or speciﬁ c costs as discontinuing: - we have not received all the information scope audit for the year ended 30 April 2014, We reviewed management’s assessment and explanations we require for our audit. these operating units represent the principal of costs in respect of those that have been business units of the Group and account for categorised as discontinuing head ofﬁ ce costs Under the Listing Rules we are required to review: 100% of the Group’s revenue, 100% of the as described further in note 4 to the Group - the Directors’ Responsibility Statement, set Group’s proﬁ t before tax, and 100% of the Financial Statements. We have sample tested out on page 70 within the Director’s Report, Group’s total assets. items within this category to conﬁ rm in relation to going concern; and the appropriate treatment. - the part of the Corporate Governance Audits of these operating units are performed at a performance materiality level calculated Statement relating to the Company’s compliance with the nine provisions of the with reference to a proportion of the Group Opinions on other matters prescribed by the UK Corporate Governance Code speciﬁ ed materiality appropriate to the relative scale Companies Act 2006 for our review. and risk associated with each operating unit. In our opinion, the information given in the They are also selected to provide a basis for Strategic Report and Directors’ Report for the undertaking audit work to address the risks of ﬁ nancial year for which the Group Financial Other matters material misstatement identiﬁ ed above. Statements are prepared is consistent with the We have reported separately on the Group Financial Statements. Company Financial Statements of Clipper The principal ways in which we responded to the risks identiﬁ ed above included: Logistics plc for the year ended 30 April 2014 and on the information in the Directors’ Matters on which we are required to report Remuneration Report that is described as (a) Revenue recognition by exception having been audited. We agreed the detailed application of We have nothing to report in respect of the revenue recognition policies for a sample of following: Stuart Watson (Senior statutory auditor) contracts and challenged management in Under the ISAs (UK and Ireland), we are for and on behalf of Ernst & Young LLP, respect of the reasonableness of judgements required to report to you if, in our opinion, Statutory Auditor, Leeds made in order to determine the recognition information in the Annual Report is: 28 August 2014 75 Clipper Logistics plc Annual Report and Accounts 2014 Group Income Statement and Statement of Comprehensive Income For the year ended 30 April Revenue Cost of sales Gross proﬁ t Other net gains Administration and other expenses Operating proﬁ t before non-recurring items Discontinuing costs Exceptional costs Operating proﬁ t Finance costs Finance income Proﬁ t before income tax Income tax expense Note 2014 Group £’000 2013 Group £’000 2012 Group £’000 2011 Group £’000 3 6 4 6 6 10 9 11 201,248 (141,514) 160,703 (110,920) 166,523 (118,565) 164,982 (117,614) 59,734 285 (50,406) 49,783 438 (41,484) 47,958 1,203 (40,494) 47,368 312 (39,432) 9,613 (2,297) (2,516) 4,800 (952) 101 3,949 (1,103) 8,737 (2,137) (392) 6,208 (1,005) 3 5,206 (1,432) 8,667 (1,991) (87) 6,589 (1,419) 55 5,225 (1,405) 8,248 (1,508) (1,145) 5,595 (1,003) 82 4,674 (1,532) Proﬁ t for the ﬁ nancial period 2,846 3,774 3,820 3,142 Other comprehensive income for the period, net of tax: To be reclassiﬁ ed to the income statement in subsequent periods: Exchange differences on retranslation of foreign operations (1) 8 26 (14) Total comprehensive income 2,845 3,782 3,846 3,128 Attributable to: Equity holders of the Company Non-controlling interest Proﬁ t for the ﬁ nancial period Basic and diluted earnings per share Adjusted basic and diluted earnings per share* 2,826 20 2,846 2.8p 6.6p 3,766 8 3,774 3.8p 5.7p 3,820 - 3,820 3.9p 5.4p 3,142 - 3,142 3.2p 5.1p *Earnings per share adjusted for discontinuing and exceptional costs as described in note 7. 76 Strategic Report | Governance | Financial Statements Group Statement of Financial Position At 30 April Note 2014 Group £’000 2013 Group £’000 2012 Group £’000 2011 Group £’000 1 May 2010 Group £’000 ASSETS NON-CURRENT ASSETS Property, plant and equipment Goodwill Other intangible assets Intangible assets Total non-current assets CURRENT ASSETS Inventories Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES CURRENT LIABILITIES Trade and other payables Financial liabilities: borrowings Short term provisions Current income tax liabilities Total current liabilities NON-CURRENT LIABILITIES Borrowings Long term provisions Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES EQUITY SHAREHOLDERS’ FUNDS Share capital Share premium Currency translation reserve Other reserve Merger reserve Retained earnings Equity attributable to the owners of the Company Non-controlling interests 13 14 16 17 18 19 20 21 11 20 21 11 22 23 15,843 19,018 549 19,567 14,835 18,785 592 19,377 12,877 18,785 232 19,017 13,368 18,785 343 19,128 35,410 34,212 31,894 32,496 19,025 28,332 5,360 14,346 22,946 2,849 18,827 20,544 2,231 20,813 20,630 156 52,717 40,141 41,602 41,599 88,127 74,353 73,496 74,095 51,724 19,141 147 318 37,313 5,774 547 530 38,741 6,022 428 689 42,247 4,187 636 803 71,330 44,164 45,880 47,873 4,260 699 366 5,325 2,093 508 672 3,273 625 490 624 963 593 391 1,739 1,947 15,299 18,785 516 19,301 34,600 15,516 20,089 320 35,925 70,525 35,938 9,219 130 179 45,466 1,994 769 357 3,120 76,655 47,437 47,619 49,820 48,586 50 48 36 84 6,006 5,248 11,472 - 8 48 36 51 18,168 8,592 26,903 13 8 48 33 51 18,168 7,569 25,877 - 8 48 8 51 18,168 5,992 24,275 - Total equity 11,472 26,916 25,877 24,275 TOTAL EQUITY AND LIABILITIES 88,127 74,353 73,496 74,095 Approved by the Board on 28 August 2014 and signed on its behalf by: D A Hodkin – Chief Financial Ofﬁ cer 8 48 21 51 18,168 3,643 21,939 - 21,939 70,525 77 Clipper Logistics plc Annual Report and Accounts 2014 Group Statement of Changes in Equity Share capital £’000 Share premium £’000 Balance at 1 May 2010 Proﬁ t for the year Other comprehensive income Equity settled transactions Dividends Balance at 30 April 2011 Proﬁ t for the year Other comprehensive income Equity settled transactions Dividends Balance at 30 April 2012 Proﬁ t for the year Other comprehensive income Equity settled transactions Dividends Balance at 30 April 2013 Proﬁ t for the year Other comprehensive income Share issue - for cash - on acquisition of minority interest Increase in ownership interest of subsidiary Equity settled transactions Dividends Balance at 30 April 2014 8 - - - - 8 - - - - 8 - - - - 8 - - 42 - - - - 50 78 Other reserve £’000 51 - - - - 51 - - - - 48 - - - - 48 - - - - 48 51 - - - - 48 - - - - - - - 48 - - - - 51 - - - 800 (767) - - 84 Currency translation reserve £’000 Carried forward £’000 21 - (13) - - 8 - 25 - - 33 - 3 - - 36 - - - - - - - 36 128 - (13) - - 115 - 25 - - 140 - 3 - - 143 - - 42 800 (767) - - 218 Strategic Report | Governance | Financial Statements Group Statement of Changes in Equity continued Brought forward £’000 Merger reserve £’000 Retained earnings £’000 Non- controlling interest £’000 Balance at 1 May 2010 128 18,168 Proﬁ t for the year Other comprehensive income Equity settled transactions Dividends - (13) - - - - - - 3,643 3,142 (1) 9 (801) Balance at 30 April 2011 115 18,168 5,992 Proﬁ t for the year Other comprehensive income Equity settled transactions Dividends - 25 - - - - - - 3,820 1 19 (2,263) - - - - - - - - - - Total £’000 21,939 3,142 (14) 9 (801) 24,275 3,820 26 19 (2,263) Balance at 30 April 2012 140 18,168 7,569 - 25,877 Proﬁ t for the year Other comprehensive income Equity settled transactions Dividends - 3 - - - - - - 3,766 - 57 (2,800) 8 5 - - 3,774 8 57 (2,800) Balance at 30 April 2013 143 18,168 8,592 13 26,916 Proﬁ t for the year Other comprehensive income Share issue - for cash - on acquisition of minority interest Increase in ownership interest of subsidiary Equity settled transactions Dividends Investment in subsidiaries charged to merger reserve - - 42 800 (767) - - - - - - - - - - (12,162) 2,826 (1) - - - 180 (6,349) - 20 - - - (33) - - - 2,846 (1) 42 800 (800) 180 (6,349) (12,162) Balance at 30 April 2014 218 6,006 5,248 - 11,472 79 Clipper Logistics plc Annual Report and Accounts 2014 Group Statement of Cash Flows For the year ended 30 April Proﬁ t before tax from operating activities Adjustments to reconcile proﬁ t before tax to net cash ﬂ ows: - Depreciation and impairment of property, plant and equipment - Amortisation and impairment of intangible assets - Gain on disposal of property, plant and equipment - Exchange differences - Finance costs - Share based payments charge Working capital adjustments: - (Increase) / decrease in trade and other receivables and prepayments - (Increase) / decrease in inventories - Increase / (decrease) in trade and other payables Operating activities: - Cash generated from operations - Interest received - Interest paid - Income tax paid Note 6 6 6 9 & 10 2014 Group £’000 3,949 3,685 219 (26) 10 851 180 (4,498) (3,566) 13,318 14,122 101 (962) (1,644) 2013 Group £’000 5,206 2,603 156 (302) (17) 1,002 57 (2,401) 5,613 (1,297) 10,620 3 (995) (1,544) 2012 Group £’000 5,225 2,577 135 (1,202) 88 1,364 19 86 3,885 (3,818) 8,359 55 (1,419) (1,294) 2011 Group £’000 4,674 2,619 176 (74) (30) 921 9 (541) (4,525) 6,729 9,958 82 (1,092) (874) Net cash ﬂ ows from operating activities 11,617 8,084 5,701 8,074 Investing activities: - Purchase of property, plant and equipment - Proceeds from sale of property, plant & equipment - Purchase of intangible assets - Transfer of subsidiaries from former parent company - Acquisition of subsidiary undertaking net of cash acquired (2,557) 172 (176) (12,162) (64) (2,809) 861 (517) - - 28a (1,982) 1,756 (23) - - Net cash ﬂ ows from investing activities (14,787) (2,465) (249) Financing activities: - Net advance from (repayment to) former parent company - New bank loans - Stocking loans advanced - Finance leases advanced - Repayment of bank loans - Shares issued - Dividends paid - Repayment of capital on ﬁ nance leases 11,846 146 1,708 1,941 (266) 42 (6,349) (2,903) (1,145) 1,427 504 79 (723) - (2,800) (2,831) 8 6,631 - 474 - - - (2,263) (2,659) (558) 404 (4) - - (158) (325) - - - (1,800) - (801) (2,529) Net cash ﬂ ows from ﬁ nancing activities 6,165 (5,489) 2,183 (5,455) Net increase in cash and cash equivalents 2,995 130 7,635 2,461 Cash and cash equivalents at start of period 2,280 2,150 (5,485) (7,946) Cash and cash equivalents at end of period 5,275 2,280 2,150 (5,485) 80 81 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements 1. General information 2.1 Basis of preparation The preparation of the ﬁ nancial information The Group Financial Statements for the year Clipper Logistics plc (‘the Company’), a under IFRSs requires management to make ended 30 April 2014 were authorised for public limited company incorporated and judgments, estimates and assumptions issue by the Board of Directors on 28 August domiciled in the United Kingdom, acts as that affect the application of policies and 2014 and the Group Statement of Financial parent undertaking for the Clipper group of reported amounts of assets and liabilities, Position was signed on the Board’s behalf by companies. The Company has independent income and expenses. The estimates and David Hodkin. operations in its own right and as at 30 April associated assumptions are based on 2014 it was a wholly owned subsidiary of historical experience and other factors that Clipper Logistics plc (the “Company”) Clipper Group Holdings Ltd. In April 2014 are believed to be reasonable under the and its subsidiaries (together the “Group”) the Group undertook a restructuring. On 16 circumstances, the results of which form provide value-added logistics and other April 2014 the Company acquired fellow the basis of making the judgements about services to predominantly the retail subsidiaries from Clipper Group Holdings Ltd carrying values of assets and liabilities that sector and also operate as distributors of which comprised 100% of the issued share are not readily apparent from other sources. commercial vehicles. capital of Northern Commercials (Mirﬁ eld) Actual results may differ from these estimates Ltd and Genesis Specialised Product Packing The Company is limited by share capital, Ltd and 75% of the capital of Clipper Geist The accounting policies which follow set out incorporated and domiciled in the United Logistics GmbH & Co. KG (collectively ‘the those policies which apply in preparing the Kingdom. The address of its registered ofﬁ ce Clipper Group’). On 30 April 2014 the Group Financial Statements for the year ended 30 is Clipper Logistics, Gelderd Road, Leeds, acquired the remaining 25% of share April 2014. LS12 6LT. capital for Clipper Geist Logistics GmbH & Co. KG. There were no remaining non- The Group’s Financial Statements have been The Group’s Financial Statements have controlling interests from this date. On 4 June prepared on a historical cost basis. been prepared in accordance with note 2014 Clipper Logistics plc was admitted to The Financial Statements are presented in 2.1 Basis of preparation, and note 2.3 Basis the premium segment of the London Stock Pounds Sterling and all values are rounded to of consolidation. The principal accounting Exchange and Clipper Group Holdings Ltd the nearest thousand (£000) unless otherwise policies adopted by the Group are set out was no longer the parent company. indicated. in note 2. The Group’s Financial Statements have been prepared in accordance with International 2.2 Going concern 2. Summary of signiﬁ cant accounting policies Financial Reporting Standards as endorsed The Financial Statements have been by the European Union (IFRS) regulations as prepared on a going concern basis. In The principal accounting policies applied they apply to the Financial Statements of determining the appropriate basis of in the preparation of these consolidated the Group for the year ended 30 April 2014 preparation of the Financial Statements, the Financial Statements are set out below. and also in accordance with those parts Directors are required to consider whether These policies have been consistently of the Companies Act 2006 applicable the Group can continue in operational applied to all years presented, unless to companies reporting under IFRS. These existence for the foreseeable future. otherwise stated. Financial Statements for the year ended 30 April 2014 are the ﬁ rst the Group has Further information in relation to the Group’s prepared in accordance with IFRS. Refer business activities, together with the factors to Note 29 for information on how the likely to affect its future development, Group adopted IFRS, including permitted performance and position is set out in the exemptions that have been taken from Strategic Review section of this report on the general requirement to apply IFRSs pages 4 to 29. retrospectively. 82 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 2.2 Going concern (continued) The Group’s forecasts and projections show (b) Merger reserve Note 26 to the Financial Statements that the Group should be able to operate As described above, the group includes the Group’s objectives, policies without the need for any increase reorganisation is a combination of entities and processes for managing its capital, its in borrowing facilities. ﬁ nancial risk management objectives and under common control; and consolidated using a pooling of interests basis. This treats its exposure to foreign exchange, credit and Having undertaken this work, the Directors the restructured group as if it was formed in interest rate risk. Further details of the Group’s are of the opinion that the Company May 2010 and a merger reserve has been net debt at 30 April 2014 are included in and the Group have adequate resources included to reﬂ ect this, with a balance of note 20 of the Financial Statements. to continue in operational existence for £18,168,000 at this date. In the year ended The Group Statement of Financial Position continue to adopt the going concern basis was made to the reserve to reﬂ ect the shows total current assets of £52,717,000 in preparing the Financial Statements. acquisition of the fellow subsidiaries from the foreseeable future. Accordingly, they 30 April 2014 a charge of £12,162,000 and total current liabilities of £71,330,000. Net current liabilities at 30 April 2014 were therefore £18,613,000. On 2 May 2014 the 2.3 Basis of consolidation Clipper Group Holdings Limited as part of the group reorganisation. bank facilities granted by Santander UK plc (a) Group reorganisation (c) Consolidations to Clipper Group Holdings Ltd were novated The restructuring noted above is a Subsidiaries are consolidated from the to the Company. On 4 June 2014 these combination of entities under common date of acquisition being the date on facilities were restructured and extended. control. IFRS 3 states that it does not apply which the Group obtains control, and are Following the restructuring, in addition to a combination of entities or businesses consolidated until the date such control to a ﬁ ve year term loan of £12,500,000 under common control. All of the entities ceases. Control comprises the power to amortising quarterly, the Group has access that make up Clipper Group have govern the ﬁ nancial and operating policies to a ﬁ ve year, non-amortising, revolving remained under common control, in of the investee so as to obtain beneﬁ t from credit facility of £12,504,000. On a each of the years disclosed. Accordingly, the its activities and is achieved through direct pro-forma basis, if this restructuring had consolidated ﬁ nancial information of or indirect ownership of its voting rights. The been in place on 30 April 2014, the Group’s the Clipper Group has been prepared to ﬁ nancial statements of subsidiaries used net current liabilities would have been reﬂ ect the combination of the restructured in the preparation of the consolidated £7,613,000 and the undrawn revolving credit Clipper Group as if it had occurred from Financial Statements are prepared on the facility would have been £11,504,000. 1 May 2010. The Directors have assessed the future same reporting year as the parent company and are based on consistent accounting funding requirements of the Group and The ﬁ nancial information of the Clipper policies. All intra Group balances and the Company and compared them to the Group for the year ended 30 April 2014 transactions, including unrealised proﬁ ts from bank facilities which are now available. and the comparative information has been them, are eliminated in full. The assessment included a detailed review prepared on a basis that combines the of ﬁ nancial and cash ﬂ ow forecasts for at results and assets and liabilities of all entities A change in the ownership interest of least the 12 month period from the date within the Clipper Group. The Clipper Group a subsidiary without loss of control is of signing the Annual Report. The Directors has not in the past constituted a separate accounted for as an equity transaction. considered a range of potential scenarios legal group. within the key markets the Group serves and how these might impact on the Group’s cash ﬂ ow. The Directors also considered what mitigating actions the Group could take to limit any adverse consequences. Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the parent company and is presented within equity in the consolidated statement of ﬁ nancial position separately from equity attributable to owners of the parent company. 83 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued The purchase method of accounting is used 2.5 Foreign currency translation Depreciation is calculated using the straight- to account for the acquisition of subsidiaries (a) Functional and presentation currency line method to allocate their cost to their by the Group other than those included Items included in the ﬁ nancial statements residual values over their estimated useful in the restructuring referred to above. The of each of the Group’s entities are measured lives, as follows: cost of an acquisition is measured as using the currency of the - Leasehold property over the length of the fair value of the assets given, equity primary economic environment in which the lease; instruments issued and liabilities incurred the entity operates (‘the functional - Plant and machinery 5% - 50% or assumed at the date of exchange, plus currency’). The combined Financial per annum; and costs directly attributable to the acquisition. Statements are presented in Pounds - Motor vehicles 12.5% - 25% per annum. Identiﬁ able assets acquired and liabilities Sterling, which is the Company’s and contingent liabilities assumed in a functional and presentation currency. Residual values and useful lives are business combination are measured initially reviewed, and adjusted if appropriate, at their fair values at the acquisition date, (b) Transactions and balances at each balance sheet date. irrespective of the extent of any minority Foreign currency transactions are translated interest. The excess of the cost of acquisition into the functional currency using the An asset’s carrying amount is written down over the fair value of the Group’s share of the exchange rates prevailing at the dates of immediately to its recoverable amount if the identiﬁ able net assets acquired is recorded the transactions. Foreign exchange gains asset’s carrying amount is greater than its as goodwill. If the cost of acquisition is and losses resulting from the settlement of estimated recoverable amount. less than the fair value of the net assets such transactions and from the translation of the subsidiary acquired, the difference at year-end exchange rates of monetary Gains and losses on disposals are is recognised directly in the statement of assets and liabilities denominated in foreign determined by comparing the proceeds comprehensive income. currencies are recognised in the Statement with the carrying amount and are Inter-company transactions, balances and unrealised gains on transactions of Comprehensive Income. recognised within ‘other net gains’ in the Statement of Comprehensive Income. between Group companies are eliminated. 2.6 Property, plant and equipment Unrealised losses are also eliminated but Property, plant and equipment is stated 2.7 Intangible assets considered an impairment indicator of the at historical cost less depreciation and (a) Goodwill asset transferred. Accounting policies of impairment. Historical cost includes Goodwill represents the excess of the cost subsidiaries have been changed where expenditure that is directly attributable to of an acquisition over the fair value of the necessary to ensure consistency with the the acquisition of the items. Group’s share of the net identiﬁ able assets policies adopted by the Group. of the acquired subsidiary/associate at the Subsequent costs are included in the date of acquisition. If the cost of acquisition asset’s carrying amount or recognised is less than the fair value of the net assets 2.4 Segment reporting as a separate asset, as appropriate, only of the subsidiary acquired, the difference Operating segments are reported in when it is probable that future economic is “negative goodwill” and is recognised in a manner consistent with the internal beneﬁ ts associated with the item will ﬂ ow to the Statement of Comprehensive Income reporting provided to the Company’s the Group and the cost of the item can be immediately. Board of Directors, collectively the Group’s measured reliably. The carrying amount of chief operating decision maker, to assess any replaced part is derecognised. All other performance and allocate capital repairs and maintenance are charged to or resources. the Statement of Comprehensive Income during the ﬁ nancial period in which they are incurred. 84 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued Goodwill on acquisitions of subsidiaries is 2.8 Impairment of non-ﬁ nancial assets The Group bases its impairment calculation included in ‘intangible assets’. Goodwill The Group assesses, at each reporting date, on detailed budgets and forecast on acquisitions of associates is included in whether there is an indication that an asset calculations, which are prepared separately ‘investments in associates’ and is tested for may be impaired. If any indication exists, or for each of the Group’s CGUs to which impairment as part of the overall balance. when annual impairment testing for an asset the individual assets are allocated. These Separately recognised goodwill is tested is required, the Group estimates the asset’s budgets and forecast calculations generally annually for impairment and carried at recoverable amount. An asset’s recoverable cover a minimum period of two years. cost less accumulated impairment losses. amount is the higher of an asset’s or cash- For longer periods, a long-term growth rate Impairment losses on goodwill are not generating unit’s (“CGU”) fair value less costs is calculated and applied to project future reversed. Gains and losses on the disposal to sell and its value in use. cash ﬂ ows after the second year. of an entity include the carrying amount of Where the asset does not generate cash goodwill relating to the entity sold. ﬂ ows that are independent from other Goodwill is allocated to cash-generating assets, the Group estimates the recoverable 2.9 Financial assets units for the purpose of impairment amount of the CGU to which the asset The Group classiﬁ es its ﬁ nancial assets in the testing. The allocation is made to those belongs. cash-generating units or groups of cash- following categories: at fair value through proﬁ t or loss and available for sale. The generating units that are expected to beneﬁ t When the carrying amount of an asset or classiﬁ cation depends on the purpose for from the business combination in which the CGU exceeds its recoverable amount, the which the ﬁ nancial assets were acquired. goodwill arose. asset is considered impaired and is written Management determines the classiﬁ cation down to its recoverable amount. of its ﬁ nancial assets at initial recognition. (b) Computer software Acquired computer software licences are In assessing value in use, the estimated (a) Financial assets at fair value capitalised on the basis of the costs incurred future cash ﬂ ows are discounted to their through proﬁ t or loss to acquire and bring to use the speciﬁ c present value using a pre-tax discount rate Financial assets at fair value through proﬁ t software. These costs are amortised over that reﬂ ects current market assessments or loss are ﬁ nancial assets held for trading. their estimated useful lives (three to ﬁ ve of the time value of money and the risks A ﬁ nancial asset is classiﬁ ed in this category years). speciﬁ c to the asset. In determining fair if acquired principally for the purpose of value less costs to sell, recent market selling in the short term. Derivatives are also Costs associated with developing or transactions are taken into account. If no categorised as held for trading unless they maintaining computer software programmes such transactions can be identiﬁ ed, an are designated as hedges. Assets in this are recognised as an expense as incurred. appropriate valuation model is used. category are classiﬁ ed as current assets. Costs that are directly associated with the These calculations are corroborated by development of identiﬁ able and unique valuation multiples, quoted share prices (b) Available-for-sale ﬁ nancial assets software products controlled by the Group, for publicly traded companies or other Available-for-sale ﬁ nancial assets are non- and that will probably generate economic available fair value indicators. derivatives that are either designated in this beneﬁ ts exceeding costs beyond one category or not classiﬁ ed in any of the other year, are recognised as intangible assets. An impairment loss is recognised as an categories. They are included in non-current Costs include the software development expense immediately. Where an impairment assets unless management intends to employee costs and an appropriate portion loss subsequently reverses, the carrying dispose of the investment within 12 months of relevant overheads. amount of the asset (or CGU) is increased of the balance sheet date. Computer software development costs amount, but so that the increased carrying recognised as assets are amortised over amount does not exceed the carrying their estimated useful lives (not exceeding amount that would have been determined to the revised estimate of its recoverable three years). had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised as income immediately. 85 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued Investments are initially recognised at fair 2.10 Inventories The amount of the provision is the difference value plus transaction costs for all ﬁ nancial Inventories are stated at the lower of cost between the asset’s carrying amount and assets not carried at fair value through and net realisable value. Cost includes all the present value of estimated future cash proﬁ t or loss. Financial assets carried at costs incurred in bringing each product to ﬂ ows, discounted at the original effective fair value through proﬁ t or loss are initially its present location and condition. Cost is interest rate. recognised at fair value and transaction determined using the ﬁ rst-in, ﬁ rst-out (“FIFO”) The carrying amount of the asset is reduced costs are expensed in the Statement of method. Net realisable value is the estimated through the use of an allowance account, Comprehensive Income. Financial assets selling price in the ordinary course of business, and the amount of the loss is recognised in are derecognised when the rights to receive less applicable variable selling expenses. the Statement of Comprehensive Income cash ﬂ ows from the investments have expired or have been transferred and the within ‘administrative expenses’. When a trade receivable is uncollectible, Group has transferred substantially all risks 2.11 Vehicles on consignment it is written off against the allowance account and rewards of ownership. Vehicles held on consignment from for trade receivables. Subsequent recoveries manufacturers are included in the statement of amounts previously written off are credited Available-for-sale ﬁ nancial assets and of ﬁ nancial position where it is considered against ‘administrative expenses’ in the ﬁ nancial assets at fair value through proﬁ t or that the Group enjoys the beneﬁ ts and Statement of Comprehensive Income. loss are subsequently carried at fair value. carries the risks of ownership. Gains or losses arising from changes in the 2.13 Cash and cash equivalents fair value of the ‘ﬁ nancial assets at fair value 2.12 Trade receivables Cash and cash equivalents includes cash through proﬁ t or loss’ category are presented Trade receivables are recognised initially at in hand, deposits held at call with banks, in the Statement of Comprehensive Income fair value and subsequently measured at other short-term highly liquid investments with within ‘other net gains’ in the period in which amortised cost using the effective interest original maturities of three months or less, they arise. method, less provision for impairment. A and bank overdrafts. Bank overdrafts are provision for impairment of trade receivables shown within borrowings in current liabilities Dividend income from ﬁ nancial assets at fair is established when there is objective on the Statement of Financial Position. value through proﬁ t or loss is recognised in evidence that the Group will not be able to Cash and cash equivalents are stated net of the Statement of Comprehensive Income as collect all amounts due according to the bank overdrafts in the cash ﬂ ow statement. part of other income when the Group’s right original terms of the receivables. to receive payments is established. Signiﬁ cant ﬁ nancial difﬁ culties of the 2.14 Trade payables The Group assesses at each balance sheet debtor, probability that the debtor will enter Trade payables are recognised initially date whether there is objective evidence bankruptcy or ﬁ nancial reorganisation, and at fair value and subsequently measured that a ﬁ nancial asset or a Group of ﬁ nancial default or delinquency in payments (more at amortised cost using the effective assets is impaired. If any such evidence than 30 days overdue) are considered interest method. exists for available-for-sale ﬁ nancial assets, indicators that the trade receivable may the cumulative loss – measured as the be impaired. difference between the acquisition cost and the current fair value, less any impairment loss on that ﬁ nancial asset previously recognised in proﬁ t or loss – is removed from equity and recognised in the Statement of Comprehensive Income. Impairment testing of trade receivables is described in note 2.12. 86 2.15 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Statement of Comprehensive Income over the period of the borrowings using the effective interest method. Borrowings are classiﬁ ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. 2.16 Income tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. However, the deferred income tax is not accounted for, if it arises from initial recognition of goodwill or an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable proﬁ ts or losses. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable proﬁ t will be available against which the temporary differences can be utilised. 87 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued Deferred income tax is provided on (c) Share based payments Provisions are measured at the present value temporary differences arising on investments IFRS 2 requires the recognition of equity of the expenditures expected to be required in subsidiaries and associates, except where settled share based payments at fair value to settle the obligation using a pre-tax rate the timing of the reversal of the temporary at the date of the grant and the recognition that reﬂ ects current market assessments difference is controlled by the Group and it is of liabilities for cash settled share based of the time value of money and the risks probable that the temporary difference will payments at the current fair value at each speciﬁ c to the obligation. The increase in not reverse in the foreseeable future. balance sheet date. All equity settled share the provision due to passage of time is based payments are ultimately recognised recognised as interest expense. Deferred income tax assets and liabilities are as an expense in the proﬁ t and loss account offset, only if a legally enforceable right exists with a corresponding credit to ‘other to set off current tax assets against current reserves’. 2.19 Revenue recognition tax liabilities, the deferred income taxes Revenue is measured at the fair value of the relate to the same taxation authority and If vesting periods or other non-market vesting consideration received or receivable for the that authority permits the Group to make a conditions apply, the expense is allocated sale of goods and services in the ordinary single net payment. over the vesting period based on the best course of the Group’s activities. Revenue available estimate of the number of shares is shown net of value-added tax, returns, expected to vest. Estimates are revised rebates and discounts and after eliminating 2.17 Employee beneﬁ ts (a) Pension obligations subsequently if there is any indication sales within the Group. that the number of shares expected to Group companies operate various pension vest differs from previous estimates. Any The Group recognises revenue when schemes. The schemes are generally cumulative adjustment prior to vesting is the amount of revenue can be reliably funded through payments to insurance recognised in the current period. Upon measured, it is probable that future companies. The Group has only deﬁ ned exercise of share options, the proceeds economic beneﬁ ts will ﬂ ow to the entity and contribution plans. A deﬁ ned contribution received net of attributable transaction costs when speciﬁ c criteria have been met for plan is a pension plan under which the are credited to share capital and where each of the Group’s activities. The amount Group pays ﬁ xed contributions into a appropriate, share premium. of revenue is not considered to be reliably separate entity. For deﬁ ned contribution plans, the Group 2.18 Provisions measurable until all contingencies relating to the sale have been resolved. In practice this means that revenue is generally recognised pays contributions to privately administered Provisions for items such as dilapidations as follows: pension insurance plans on a contractual and legal claims are recognised when: the - Value-added logistics services – revenue or voluntary basis. The Group has no further Group has a present legal or constructive is recognised when the service is rendered payment obligations once the contributions obligation as a result of past events; it is - Distribution of commercial vehicles – have been paid. The contributions are probable that an outﬂ ow of resources will revenue is recognised when goods recognised as employee beneﬁ t expense be required to settle the obligation; and the and/or services are supplied or, when they are due. amount has been reliably estimated. for services under repair contracts, over the period of the contract. (b) Proﬁ t-sharing and bonus plans Where there are a number of similar The Group recognises a liability and an obligations, the likelihood that an outﬂ ow expense for bonuses and proﬁ t-sharing, will be required in settlement is determined 2.20 Grants based on a formula that takes into by considering the class of obligations as Grants received in relation to the purchase consideration the proﬁ t attributable to the a whole. A provision is recognised even if of non-current assets are released to the Company’s shareholders after certain the likelihood of an outﬂ ow with respect to Statement of Comprehensive Income adjustments. The Group recognises a any one item included in the same class of in proportion to the depreciation or provision where contractually obliged or obligations may be small. amortisation charge in respect of where there is a past practice that has created a constructive obligation. those assets. 88 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 2.21 Leases 2.23 Exceptional items 2.25 Critical accounting estimates Leases in which a signiﬁ cant portion of the Items that are both material and non- and assumptions risks and rewards of ownership are retained recurring are presented as exceptional items The Group makes estimates and by the lessor are classiﬁ ed as operating within their relevant consolidated Statement assumptions concerning the future. The leases. Payments made under operating of Comprehensive Income category. The resulting accounting estimates will, by leases (net of any incentives received from separate reporting of exceptional items deﬁ nition, seldom equal the related actual the lessor) are charged to the Statement of helps provide a clearer indication of the results. The estimates and assumptions that Comprehensive Income on a straight-line Group’s underlying business performance. have a signiﬁ cant risk of causing a material basis over the period of the lease. adjustment to the carrying amounts of assets Items which may give rise to classiﬁ cation as and liabilities within the next ﬁ nancial year Assets held under ﬁ nance leases, which exceptional include, but are not limited are discussed below. transfer to the Group substantially all the risks to, restructuring of the business or depot and beneﬁ ts incidental to ownership of the network, asset impairments and litigation (a) Estimated impairment of goodwill leased item, are capitalised at the inception settlements. of the lease, with a corresponding liability being recognised for the lower of the fair The Group annually tests whether goodwill has suffered any impairment, in accordance with the accounting policy stated above. value of the leased asset and the present 2.24 Financial risk management The recoverable amounts of cash- value of the minimum lease payments. The Group carries out treasury hedging generating units have been determined Lease payments are apportioned between activities to manage exposures to interest based on value-in-use calculations. These the reduction of the lease liability and rate movements on its core borrowings using calculations require the use of estimates, ﬁ nance charges in the income statement interest rate swaps and forward contracts. both in arriving at the expected future cash so as to achieve a constant rate of interest ﬂ ows and the application of a suitable on the remaining balance of the liability. The The Group only uses derivatives for hedging discount rate in order to calculate the property, plant and equipment acquired purposes and they are recognised at fair present value of these ﬂ ows. under ﬁ nance leases is depreciated over value and are re-measured to fair value at the shorter of the estimated useful life of each balance sheet date. Where an interest (b) Income taxes the asset and the lease term; where the rate swap qualiﬁ es as an effective hedge Signiﬁ cant judgement is required in lease contains an option to purchase which under IAS 39, movements in fair value are determining the provision for income is expected to be exercised, the asset is shown as an adjustment to the net interest taxes. There are many transactions and depreciated over the useful life of the asset. charge being hedged. The accounting policy adopted for ﬁ nance calculations for which the ultimate tax determination is uncertain during the leases is also applied to hire purchase Movements in fair value of derivatives that ordinary course of business. The Group agreements. do not qualify as an effective hedge under recognises liabilities for anticipated tax IAS 39 are shown in ‘other net gains’ within audit issues based on estimates of whether the Statement of Comprehensive Income. additional taxes will be due. Where the 2.22 Dividend distribution The Group identiﬁ es, evaluates and hedges ﬁ nal tax outcome of these matters is Dividend distribution to the Company’s ﬁ nancial risks centrally under policies different from the amounts that were initially shareholders is recognised as a liability in the approved by the Board covering speciﬁ c recorded, such differences will impact the Group’s Financial Statements in the period areas, such as interest rate risk, foreign income tax and deferred tax provisions in in which the dividends are approved by the exchange risk and credit risk. the period in which such determination Company’s shareholders. is made. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 89 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 2.26. Borrowing costs - IAS 27 – ‘Separate Financial Statements - AIP IFRS 1 – ‘First-time Adoption of Borrowing costs directly attributable to the effective for annual periods on or after 1 International Financial Reporting Standards acquisition, construction or production of January 2014’; – Meaning of ‘effective IFRSs’ effective for an asset that necessarily takes a substantial - IAS 28 – ‘Investments in Associates and annual periods on or after 1 July 2014’; period of time to get ready for its intended Joint Ventures effective for annual periods - AIP IFRS 3 – ‘Business Combinations use or sale are capitalised as part of the cost on or after 1 January 2014’; – Scope exceptions for joint ventures of the respective assets. All other borrowing - IAS 36 – ‘Recoverable Amount Disclosures effective for annual periods on or after costs are expensed in the period they occur. for Non-Financial Assets – Amendments to 1 July 2014’; Borrowing costs consist of interest and other IAS 36 effective for annual periods on or - AIP IFRS 13 – ‘Fair Value Measurement costs that an entity incurs in connection with after 1 January 2014’; – Scope of paragraph 52 (portfolio the borrowing of funds. - IAS 39 – ‘Novation of Derivatives and exception) effective for annual periods Continuation of Hedge Accounting – on or after 1 July 2014’; Amendments to IAS 39 effective for annual - AIP IAS 40 – ‘Investment Property – 2.27. Adoption of new and revised periods on or after 1 January 2014’; Interrelationship between IFRS 3 and IAS reporting standards - IFRIC 21 – ‘Levies effective for annual 40 (ancillary services) effective for annual The Group has applied all accounting periods on or after 1 January 2014’; periods on or after 1 July 2014’; and standards and interpretations issued by - IAS 19 – ‘Deﬁ ned Beneﬁ t Plans: Employee - IFRS 14 – ‘Regulatory Deferral Accounts the IASB and IFRIC except for the following Contributions – Amendments to IAS 19 effective for annual periods on or after standards and interpretations which were in effective for annual periods on or after 1 1 January 2016’. issue but not yet effective: July 2014’; - IAS 32 (revised) – ‘Offsetting ﬁ nancial assets Deﬁ nitions of vesting conditions effective given in the original IASB/IFRIC standards and - AIP IFRS 2 – ‘Share-based Payment – The effective dates stated above are those and ﬁ nancial liabilities – Amendments for annual periods on or after 1 July 2014’; interpretations. to IAS 32 effective for annual periods - AIP IFRS 3 – ‘Business Combinations – commencing on or after 1 January 2014’; Accounting for contingent consideration As the Group prepares its ﬁ nancial - IFRS 7 – ‘Financial Instruments: Disclosures in a business combination effective for information in accordance with IFRS (Amendment) – initial application of IFRS 9 annual periods on or after 1 July 2014’; as adopted by the European Union, effective for annual periods commencing - AIP IFRS 8 – ‘Operating Segments – the application of new standards and on or after 1 January 2014’; Aggregation of operating segments interpretations will be subject to them having - IFRS 9 – ‘Financial instruments: effective for annual periods on or after 1 been endorsed for use in the EU via the EU Classiﬁ cation and measurement effective July 2014’; Endorsement mechanism. In the majority for annual periods commencing on or - AIP IFRS 8 – ‘Operating Segments – of cases this will result in an effective date after 1 January 2018’; Reconciliation of the total of the reportable consistent with that given in the original - IFRS 10 – ‘Consolidated Financial segments’ assets to the entity’s assets standard or interpretation but the need for Statements, effective for annual periods effective for annual periods on or after 1 endorsement restricts the Group’s discretion commencing on or after 1 January 2014’; July 2014’; to early adopt standards. - IFRS 11 – ‘Joint Arrangements effective for - AIP IFRS 13 – ‘Fair Value Measurement annual periods commencing on or after 1 – Short-term receivables and payables The Directors do not anticipate that the January 2014’; effective for annual periods on or after 1 adoption of the remaining standards and - IFRS 12 – ‘Disclosure of Interests in other July 2014’; interpretations will have a material impact entities effective for annual periods - AIP IAS 16 – ‘Property, Plant and Equipment on the Group’s historical ﬁ nancial information commencing on or after 1 January 2014’; and IAS 38 Intangible Assets – Revaluation in the period of initial application. - IFRS 15 – Revenue from Contracts with method – proportionate restatement of Customers, was issued by the IASB on accumulated depreciation/amortisation 28 May 2014 and is effective for annual effective for annual periods on or after 1 periods commencing on or after 1 July 2014’; January 2017; 90 - AIP IAS 24 – ‘Related Party Disclosures – Key management personnel effective for annual periods on or after 1 July 2014’; Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 3. Revenue Revenue recognised in the income statement is analysed as follows: E-fulﬁ lment logistics services Non E-fulﬁ lment logistics services Value-added logistics services Distribution of commercial vehicles Inter-segment sales 2014 Group £’000 46,046 89,557 135,603 66,796 (1,151) 2013 Group £’000 29,605 69,282 98,887 62,947 (1,131) 2012 Group £’000 19,307 73,296 92,603 74,735 (815) 2011 Group £’000 16,448 75,481 91,929 73,710 (657) Revenue from external customers 201,248 160,703 166,523 164,982 Geographical information - revenues from external customers: United Kingdom Germany Rest of Europe Total Geography is determined by the location of the end customer 2014 Group £’000 186,462 13,112 1,674 2013 Group £’000 149,246 10,591 866 2012 Group £’000 153,525 10,231 2,767 2011 Group £’000 155,017 9,331 634 201,248 160,703 166,523 164,982 91 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 4. Segment information Within the value-added logistics services For the Group, the Chief Operating Decision segment, the CODM also reviews Maker (“CODM”) is the main Board of performance of three separate business Directors. The CODM monitors the operating activities: results of each business unit separately for - E-fulﬁ lment logistics services the purposes of making decisions about - Non E-fulﬁ lment logistics services resource allocation and performance - Central logistics overheads, being the assessment. Segment performance is costs of support services speciﬁ c to the evaluated based on operating proﬁ t or value-added logistics services segment, loss, both before and after exceptional but which are impractical to allocate items. This measurement basis excludes between the sub-segment activities Group-wide central services and ﬁ nancing costs which are not allocated to operating Inter-segment transactions are entered segments. into under normal commercial terms and conditions and on an arm’s length basis For management purposes, the Group that would also be available to unrelated is organised into two main reportable third parties. segments: - Value-added logistics services The following tables present proﬁ t - Distribution of commercial vehicles, information for continuing operations including sales, servicing and repairs regarding the Group’s business segments for the four years ended 30 April 2014: Operating proﬁ t before non-recurring items: E-fulﬁ lment logistics Non E-fulﬁ lment logistics Central logistics overheads Value-added logistics services Distribution of commercial vehicles Head ofﬁ ce costs – continuing 2014 Group £’000 3,724 9,163 (4,228) 8,659 1,836 (882) 2013 Group £’000 2,492 7,910 (2,408) 7,994 1,464 (721) 2012 Group £’000 1,938 7,740 (1,639) 8,039 1,299 (671) 2011 Group £’000 1,280 8,140 (2,403) 7,017 1,903 (672) Group operating proﬁ t before non-recurring items 9,613 8,737 8,667 8,248 92 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 4. Segment information (continued) Exceptional and discontinuing costs: E-fulﬁ lment logistics Non E-fulﬁ lment logistics Central logistics Value-added logistics services Distribution of commercial vehicles Segment total exceptional items IPO costs1 Head ofﬁ ce costs – discontinuing2 2014 Group £’000 (10) - (30) (40) (495) (535) 2013 Group £’000 (208) - - (208) (184) (392) 2012 Group £’000 - (51) (36) (87) - (87) (1,981) (2,297) - (2,137) - (1,991) 2011 Group £’000 - (1,121) (21) (1,142) (3) (1,145) - (1,508) Group total exceptional and discontinuing costs (4,813) (2,529) (2,078) (2,653) Operating proﬁ t and proﬁ t before income tax: Operating proﬁ t: E-fulﬁ lment logistics Non E-fulﬁ lment logistics Central logistics overheads Value-added logistics services Distribution of commercial vehicles IPO costs1 Head ofﬁ ce costs2 2014 Group £’000 3,714 9,163 (4,258) 8,619 1,341 (1,981) (3,179) 2013 Group £’000 2,284 7,910 (2,408) 7,786 1,280 - (2,858) 2012 Group £’000 1,938 7,689 (1,675) 7,952 1,299 - (2,662) 2011 Group £’000 1,280 7,019 (2,424) 5,875 1,900 - (2,180) Group operating proﬁ t 4,800 6,208 6,589 5,595 Finance costs Finance income (952) 101 (1,005) 3 (1,419) 55 (1,003) 82 Proﬁ t before income tax 3,949 5,206 5,225 4,674 1 Professional fees and other costs paid in relation to the Initial Public Offering. 2 Head ofﬁ ce costs include a number of items which will not be borne by the Group post-Admission. These consist of certain advertising, sponsorship and corporate entertaining expenses, remuneration of a retiring Director, consultancy and professional fees in respect of potential investment opportunity appraisals and the costs of operating the Chairman’s private ofﬁ ce. 93 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued The Group has one customer that in the year ended 30 April 2013 accounted for greater than 10% of the total Group revenue. The revenue from this customer all arose within the value-added logistics services segment as follows: Revenue 2014 Group £’000 2013 Group £’000 - 18,999 2012 Group £’000 - 2011 Group £’000 - The segment assets and liabilities at the balance sheet date are as follows: At 1 May 2010: Value-added logistics services Distribution of commercial vehicles Segment assets £’000 42,082 28,123 Segment liabilities £’000 (15,770) (21,067) Segment assets/(liabilities) 70,205 (36,837) Unallocated assets/(liabilities): - Cash and cash equivalents - Financial liabilities - Deferred tax - Income tax assets/(liabilities) 320 (11,213) (357) (179) Total assets/(liabilities) 70,525 (48,586) At 30 April 2011: Value-added logistics services Distribution of commercial vehicles Segment assets £’000 38,117 35,822 Segment liabilities £’000 (13,317) (30,159) Segment assets/(liabilities) 73,939 (43,476) Unallocated assets/(liabilities): - Cash and cash equivalents - Financial liabilities - Deferred tax - Income tax assets/(liabilities) 156 (5,150) (391) (803) Total assets/(liabilities) 74,095 (49,820) 94 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 4. Segment information (continued) At 30 April 2012: Value-added logistics services Distribution of commercial vehicles Segment assets £’000 38,878 32,387 Segment liabilities £’000 (15,034) (24,625) Segment assets/(liabilities) 71,265 (39,659) Unallocated assets/(liabilities): - Cash and cash equivalents - Financial liabilities - Deferred tax - Income tax assets/(liabilities) 2,231 (6,647) (624) (689) Total assets/(liabilities) 73,496 (47,619) At 30 April 2013: Value-added logistics services Distribution of commercial vehicles Segment assets £’000 43,253 28,251 Segment liabilities £’000 (19,023) (19,345) Segment assets/(liabilities) 71,504 (38,368) Unallocated assets/(liabilities): - Cash and cash equivalents - Financial liabilities - Deferred tax - Income tax assets/(liabilities) 2,849 (7,867) (672) (530) Total assets/(liabilities) 74,353 (47,437) At 30 April 2014: Value-added logistics services Distribution of commercial vehicles Segment assets £’000 44,376 38,391 Segment liabilities £’000 (27,249) (25,321) Segment assets/(liabilities) 82,767 (52,570) Unallocated assets/(liabilities): - Cash and cash equivalents - Financial liabilities - Deferred tax - Income tax assets/(liabilities) 5,360 (23,401) (366) (318) Total assets/(liabilities) 88,127 (76,655) 95 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 4. Segment information (continued) Capital expenditure, depreciation and amortisation by segment in the year ended 30 April was as follows: Capital expenditure: Value-added logistics services Distribution of commercial vehicles 2014 Group £’000 4,203 936 2013 Group £’000 4,604 1,011 2012 Group £’000 2,025 693 2011 Group £’000 213 791 Total 5,139 5,615 2,718 1,004 Capital expenditure comprises additions to property, plant and equipment (note 13) and intangible assets (note 14). Depreciation: 2014 Group £’000 3,100 585 2013 Group £’000 2,108 495 2012 Group £’000 2,087 490 2011 Group £’000 2,168 450 3,685 2,603 2,577 2,618 2014 Group £’000 212 7 219 2014 Group £’000 32,621 2,789 2013 Group £’000 141 15 156 2013 Group £’000 32,403 1,809 2012 Group £’000 113 22 135 2012 Group £’000 30,195 1,699 2011 Group £’000 139 38 177 2011 Group £’000 30,914 1,582 35,410 34,212 31,894 32,496 Non-current assets held by each Geographical area are made up as follows: Value-added logistics services Distribution of commercial vehicles Total Amortisation: Value-added logistics services Distribution of commercial vehicles Total United Kingdom Germany Total 96 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 5. Staff costs Wages and salaries Social security costs Pension costs for the deﬁ ned contribution scheme Share based payments 2014 Group £’000 52,594 4,839 883 180 2013 Group £’000 41,743 3,992 737 57 2012 Group £’000 40,414 3,952 739 19 2011 Group £’000 39,781 3,995 610 9 Total 58,496 46,529 45,124 44,395 The average monthly number of employees during the period was made up as follows: Warehousing Distribution Service and maintenance Administration 2014 Group Number 1,433 379 237 334 2013 Group Number 1,119 336 216 327 Total 2,383 1,998 Key management compensation (including Executive Directors): Wages and salaries Social security costs Pension costs for the deﬁ ned contribution scheme Share based payments 2014 Group £’000 2,411 333 389 180 2013 Group £’000 2,340 323 397 57 2012 Group Number 1,001 350 233 327 1,911 2012 Group £’000 2,171 299 433 19 2011 Group Number 1,071 364 221 301 1,957 2011 Group £’000 2,012 257 494 9 Total 3,313 3,117 2,922 2,772 97 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 5. Staff costs (continued) Directors’ emoluments: Aggregate emoluments Pension costs for the deﬁ ned contribution scheme 2014 Group £’000 1,300 139 2013 Group £’000 1,155 92 2012 Group £’000 1,046 125 2011 Group £’000 1,017 135 Total 1,439 1,247 1,171 1,152 The number of Directors who were accruing beneﬁ ts under a Group Pension Scheme is as follows: 2014 Group Number 2013 Group Number 2012 Group Number 2011 Group Number Deﬁ ned contribution plans 5 5 5 5 Emoluments in respect of the highest paid Director: Aggregate emoluments Pension costs for the deﬁ ned contribution scheme Total 2014 Group £’000 500 15 515 2013 Group £’000 359 15 374 2012 Group £’000 327 17 344 2011 Group £’000 320 15 335 98 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 6. Group operating proﬁ t This is stated after charging/(crediting): Depreciation of property, plant and equipment - owned assets Depreciation of property, plant and equipment - leased assets Amortisation of intangibles assets (included within administration & other expenses) 2014 Group £’000 1,760 1,925 2013 Group £’000 1,754 849 2012 Group £’000 1,558 1,019 2011 Group £’000 1,589 1,029 219 156 135 177 Total depreciation and amortisation expense 3,904 2,759 2,712 2,795 Operating lease rentals - Plant and machinery - Land and buildings Loss arising on the Clipper Group Employee Beneﬁ t Trust 6,672 12,658 - 5,583 9,195 5 5,850 9,020 - 5,421 9,181 5 Auditors’ remuneration: EY LLP - Group audit fees - Tax services - Corporate ﬁ nance services Baker Tilly UK Audit LLP & Associates - Group audit fees - Tax services - Corporate ﬁ nance services Total auditors’ remuneration: - Audit of the Group Financial Statements - Audit of the subsidiaries - Non-audit fees Total fees paid to the Group’s auditors Exceptional items: - Closure of depots - Redundancy costs on reorganisation - Aborted contract exit costs - IPO transaction costs Total exceptional items Other net gains: - Proﬁ t on sale of property, plant and equipment - Dealership contributions - Amortisation of grants Total net gains 135 - 565 6 24 - 50 91 589 730 363 162 10 1,981 2,516 26 259 - 285 - - - 78 51 - 20 58 51 - - - 75 46 16 20 55 62 - - - 72 1 67 20 52 68 129 137 140 184 - 208 - 392 302 136 - 438 - 87 - - 87 1,202 - 1 1,203 981 164 - - 1,145 74 203 35 312 99 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 7. Earnings per share Basic earnings per share amounts are calculated by dividing proﬁ t for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. The following reﬂ ects the income and share data used in the basic earnings per share computation: Proﬁ t attributable to ordinary equity holders of the Company 2014 Group £’000 2013 Group £’000 2012 Group £’000 2011 Group £’000 2,826 3,766 3,820 3,142 Thousands Thousands Thousands Thousands Basic weighted average number of shares 99,160 99,158 99,158 99,158 Basic and diluted earnings per share 2.8p 3.8p 3.9p 3.2p The weighted average number of shares has been calculated assuming all shares were converted from £1 to 0.05p shares as from 1 May 2010 in accordance with IAS 33.28. Adjusted earnings per share As set out in note 22, during the year to 30 April 2014 there was a group reorganisation involving both an issue and a subdivision of shares. In addition, there was a large amount of non-recurring costs. Consequently, the basic measure of earnings per share is signiﬁ cantly distorted by these factors. Adjusting earnings to exclude discontinuing and exceptional costs and the tax effect thereon, gives adjusted earnings of £6,540,000 for the year to 30 April 2014 (2013: £5,690,000, 2012: £5,361,000, 2011: £5,056,000). Adjusted earnings per share: Proﬁ t attributable to ordinary equity holders of the Company Discontinuing costs Exceptional costs Tax effect at standard rate Adjusted earnings 2014 Group £’000 2,826 2,297 2,516 (1,099) 6,540 2013 Group £’000 3,766 2,137 392 (605) 5,690 2012 Group £’000 3,820 1,991 87 (537) 5,361 2011 Group £’000 3,142 1,508 1,145 (739) 5,056 Thousands Thousands Thousands Thousands Basic weighted average number of shares 99,160 99,158 99,158 99,158 Adjusted basic and diluted earnings per share 6.6p 5.7p 5.4p 5.1p 100 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 8. Dividends and other distributions Dividends declared and paid by the Company during the year to former parent company* Dividends declared and paid by other Group members Payments charged to merger reserve in respect of the transfer of subsidiaries 2014 Group £’000 2013 Group £’000 2012 Group £’000 2011 Group £’000 2,500 2,800 1,600 801 3,849 12,162 - - 663 - - - Total distributions 18,511 2,800 2,263 801 *Dividend per ‘A’ ordinary share £649.02 £726.91 £415.37 £207.97 9. Finance income Bank interest Other interest Amounts receivable from former parent company Total interest income for ﬁ nancial assets measured at amortised cost 10. Finance costs On bank loans and overdrafts On hire purchase agreements Amortisation of debt issue costs Commercial vehicle stocking interest Other interest payable Amounts payable to former parent company Total interest expense for ﬁ nancial liabilities measured at amortised cost 2014 Group £’000 - 1 100 101 2014 Group £’000 19 292 - 305 38 298 2013 Group £’000 3 - - 3 2013 Group £’000 44 175 - 444 23 319 2012 Group £’000 4 - 51 55 2012 Group £’000 115 279 153 311 144 417 2011 Group £’000 55 - 27 82 2011 Group £’000 295 246 - 267 56 139 952 1,005 1,419 1,003 101 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 11. Income tax expense a) Tax charged in the income statement: Current income tax: UK & foreign corporation tax Amounts under (over) provided in previous years 2014 Group £’000 1,408 3 2013 Group £’000 1,366 16 Total income tax on continuing operations 1,411 1,382 Deferred tax: Origination and reversal of temporary difference Amounts under (over) provided in previous years Impact of change in tax laws and rates Total deferred tax Tax expense in the income statement on continuing operations (267) 4 (45) (308) 30 - 20 50 2012 Group £’000 1,194 (15) 1,179 227 - (1) 226 2011 Group £’000 1,469 29 1,498 (90) - 124 34 1,103 1,432 1,405 1,532 b) Tax relating to items charged or credited to other comprehensive income: Deferred tax: Exchange differences on retranslation of foreign operations Changes in tax laws and rates Total deferred tax Tax expense in the statement of other comprehensive income 2014 Group £’000 2013 Group £’000 2012 Group £’000 2011 Group £’000 - - - - - - - - - - - - - - - - 102 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued c) Reconciliation of income tax charge: The income tax expense in the income statement for the period differs from the standard rate of corporation tax in the UK. The differences are reconciled below: Proﬁ t before taxation from continuing operations Standard rate of corporation tax in UK Tax on proﬁ t on ordinary activities at standard rate Expenses not allowable for tax purposes Tax under (over) provided in previous years Difference in tax rates overseas Utilisation of previously unrecognised tax losses Deferred tax rate difference 2014 Group £’000 3,949 22.84% 902 223 7 16 - (45) 2013 Group £’000 5,206 23.92% 1,245 100 16 42 - 29 2012 Group £’000 5,225 2011 Group £’000 4,674 25.84% 1,350 27.84% 1,301 84 (15) - (13) (1) 132 29 - (54) 124 Total tax expense reported in the income statement 1,103 1,432 1,405 1,532 d) Deferred tax in the income statement: Deferred tax on accelerated capital allowances Deferred tax on other temporary differences 2014 Group £’000 (261) (47) (308) 2013 Group £’000 (36) (14) (50) 2012 Group £’000 (149) (77) (226) 2011 Group £’000 (170) 136 (34) The UK corporation tax rate reduced from 28% to 26% with effect from 1 April 2011, from 26% to 24% with effect from 1 April 2012, from 24% to 23% with effect from 1 April 2013, and from 23% to 21% with effect from 1 April 2014. A further reduction to 20% is effective from 1 April 2015. Accordingly, these rates have been applied in the measurement of the Group’s deferred tax assets and liabilities as at 30 April 2014. e) Deferred tax in the statement of ﬁ nancial position: Deferred tax liability: Accelerated capital allowances Deferred tax asset: Provisions & other timing differences Net deferred tax liability 2014 Group £’000 2013 Group £’000 2012 Group £’000 2011 Group £’000 1 May 2010 Group £’000 (466) (727) (691) (542) (372) 100 (366) 55 (672) 67 151 15 (624) (391) (357) 103 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 12. Share based payments The Enterprise Management Incentive Plan The Unapproved Share Option Scheme Options granted under the EMI Plan or (“EMI Plan”) was introduced by Clipper (“Unapproved Scheme”) was introduced by Unapproved Scheme would only become Group Holdings Ltd in January 2004. Under Clipper Group Holdings Ltd in June 2011. exercisable on the sale or ﬂ otation of the the EMI Plan the former parent company Under the Unapproved Scheme the former former parent company, and were subject directors could grant options over shares in parent company directors could grant to speciﬁ c performance criteria for each the former parent company to employees options over shares in the former parent award, generally applicable to the senior of any group company. company to employees of any group manager’s employing company. Exercise company. of an option is subject to continued Options were granted with a ﬁ xed exercise employment. price equal to the nominal value of the Options were granted with a ﬁ xed exercise shares under option at the date of grant. price equal to the nominal value of the The fair value of the options granted were The contractual life of an option is 10 shares under option at the date of grant. valued using the methodology of an HM years. Awards under the EMI Plan are The contractual life of an option is 15 years. Revenue & Customs approved valuation of generally reserved for employees at senior Awards under the Unapproved Scheme existing shares in 2010, applied to current management level and above and at 30 are generally reserved for employees at ﬁ nancial information at the time of grant. April 2014 two (2013: three, 2012: three, senior management level and above and The fair value assumes that all performance 2011: three, 1 May 2010: three) such at 30 April 2014 four (2013: three, 2012: criteria are met. The expected life is the awards had been made to employees of two, 2011: none, 1 May 2010: none) such average expected period to exercise. the Group. There are no reload features. awards had been made. Volatility and dividend yield have not These options would be equity settled. is no ready market in the former parent been included in the calculation as there company’s shares. The weighted average exercise price of options in issue is £1.00. A reconciliation of option movements over the year is as follows: Outstanding at 1 May Granted Lapsed Outstanding at 30 April Exercisable 2014 Number 2013 Number 2012 Number 2011 Number 394 58 (83) 369 - 336 58 - 394 - 249 87 - 336 - 249 - - 249 - The total charge for the year ended 30 April 2014 relating to employee share based payment plans was £180,000 (2013: £57,000, 2012: £19,000, 2011: £9,000, 1 May 2010: £15,000). All outstanding options were waived in May 2014. 104 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 13. Property, plant and equipment Group: COST At 1 May 2010 Additions Disposals Foreign currency adjustment At 30 April 2011 Additions Disposals Foreign currency adjustment At 30 April 2012 Additions Disposals Foreign currency adjustment At 30 April 2013 Acquisitions Additions Disposals Foreign currency adjustment At 30 April 2014 Leasehold property £’000 Motor vehicles £’000 Plant, machinery, ﬁ xtures & ﬁ ttings £’000 Total £’000 3,085 86 (146) - 3,025 167 (55) - 3,137 329 (27) - 3,439 37 586 (58) (1) 4,003 3,863 304 (1,514) 5 2,658 777 (1,081) (17) 2,337 1,156 (572) 9 2,931 12 1,215 (528) (10) 3,620 20,995 27,943 610 (285) 20 1,000 (1,945) 25 21,340 27,023 1,751 (2,779) (69) 2,695 (3,914) (86) 20,243 25,717 3,614 (1,170) 37 5,099 (1,769) 46 22,723 29,093 78 2,929 (159) (34) 127 4,730 (745) (45) 25,537 33,160 105 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 13. Property, plant and equipment (continued) Group: ACCUMULATED DEPRECIATION At 1 May 2010 Charge for the period Disposals Foreign currency adjustment At 30 April 2011 Charge for the period Disposals Foreign currency adjustment Leasehold property £’000 Motor vehicles £’000 Plant, machinery, ﬁ xtures & ﬁ ttings £’000 1,050 222 (146) - 1,126 236 (55) - 2,553 497 (1,199) 3 1,854 375 (795) (9) 9,041 1,900 (270) 4 10,675 1,966 (2,510) (23) Total £’000 12,644 2,619 (1,615) 7 13,655 2,577 (3,360) (32) At 30 April 2012 1,307 1,425 10,108 12,840 Charge for the period Disposals Foreign currency adjustment 230 (27) - 415 (445) 6 1,958 (737) 18 2,603 (1,209) 24 At 30 April 2013 1,510 1,401 11,347 14,258 Charge for the period Disposals Foreign currency adjustment 250 (58) (1) 596 (383) (6) 2,839 (159) (19) 3,685 (600) (26) At 30 April 2014 1,701 1,608 14,008 17,317 NET BOOK VALUE At 1 May 2010 At 30 April 2011 At 30 April 2012 At 30 April 2013 At 30 April 2014 2,035 1,899 1,830 1,929 2,302 1,310 804 913 1,530 2,012 11,954 10,665 10,134 11,376 11,529 15,299 13,368 12,877 14,835 15,843 Included within property, plant and equipment are amounts held under ﬁ nance lease contracts. At 30 April 2014 the net book value of these assets was £4,767,000 (30 April 2013: £2,503,000, 30 April 2012: £2,567,000, 30 April 2011: £4,853,000, 1 May 2010: £3,416,000). 106 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 14. Intangible assets Group: COST: At 1 May 2010 Additions Disposals At 30 April 2011 Additions Disposals At 30 April 2012 Additions Disposals At 30 April 2013 Additions Disposals At 30 April 2014 Goodwill £’000 Contracts and Licenses £’000 Computer Software £’000 18,785 - - 18,785 - - 18,785 - - 723 - - 723 - - 723 - - 929 4 - 933 23 (59) 897 516 - Total £’000 20,437 4 - 20,441 23 (59) 20,405 516 - 18,785 723 1,413 20,921 233 - - - 176 - 409 - 19,018 723 1,589 21,330 107 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 14. Intangible assets (continued) Group: ACCUMULATED AMORTISATION: At 1 May 2010 Charge for the period At 30 April 2011 Charge for the period Disposals At 30 April 2012 Charge for the period At 30 April 2013 Charge for the period At 30 April 2014 NET BOOK VALUE: At 1 May 2010 At 30 April 2011 At 30 April 2012 At 30 April 2013 At 30 April 2014 108 Goodwill £’000 Contracts and Licenses £’000 Computer Software £’000 - - - - - - - - - - 18,785 18,785 18,785 18,785 19,018 723 - 723 - - 723 - 723 - 723 - - - - - 413 177 590 135 (60) 665 156 821 219 1,040 516 343 232 592 549 Total £’000 1,136 177 1,313 135 (60) 1,388 156 1,544 219 1,763 19,301 19,128 19,017 19,377 19,567 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 15. Impairment test for goodwill The carrying amount of goodwill has been allocated to cash generating units (“CGU”s) as follows: Value-added logistics services Distribution of commercial vehicles 2014 Group £’000 13,092 5,926 2013 Group £’000 12,859 5,926 2012 Group £’000 12,859 5,926 2011 Group £’000 12,859 5,926 1 May 2010 Group £’000 12,859 5,926 19,018 18,785 18,785 18,785 18,785 The recoverable amount of a CGU is determined based on value-in-use calculations. The value-in-use calculations have used pre-tax cash ﬂ ow projections based on the Board approved business plans for the two years ending 30 April 2016. Subsequent cash ﬂ ows are extrapolated using an estimated long term growth rate of 2.5% to 2025. The cash ﬂ ows have then been discounted using a pre-tax risk adjusted discount rate of 10%. The pre-tax adjusted discount rate has been estimated based on other similar sized companies in similar industries. The Directors have concluded that no reasonably foreseeable change in the key assumptions would give rise to an impairment. 109 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 16. Inventories Component parts and consumable stores Commercial vehicles Commercial vehicles on consignment 2014 Group £’000 3,427 2,669 12,929 2013 Group £’000 3,723 2,121 8,502 2012 Group £’000 4,211 2,953 11,663 2011 Group £’000 4,016 2,605 14,192 1 May 2010 Group £’000 3,118 1,799 10,599 Total inventories 19,025 14,346 18,827 20,813 15,516 See below for the movements in the provision for obsolescence: At 1 May 2010 Charged for the year Utilised At 30 April 2011 Charged for the year Utilised At 30 April 2012 Charged for the year Utilised At 30 April 2013 Charged for the year Utilised At 30 April 2014 Group £’000 101 40 (30) 111 45 (51) 105 65 (66) 104 127 (99) 132 The cost of inventories recognised as an expense amounted to £61,789,000 (2013: £61,760,000, 2012: £76,072,000, 2011: £69,082,000). Included within commercial vehicles is £1,071,000 (2013: £1,609,000, 2012: £956,000, 2011: £591,000, 1 May 2010: £282,000) relating to assets held under hire purchase agreements. 110 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 17. Trade and other receivables Trade receivables Less: provision for impairment of receivables 2014 Group £’000 16,378 (349) 2013 Group £’000 13,010 (172) 2012 Group £’000 12,471 (81) 2011 Group £’000 14,372 (77) 1 May 2010 Group £’000 13,965 (222) Trade receivables - net 16,029 12,838 12,390 14,295 13,743 Other receivables Director loan accounts (see note 27) Prepayments and accrued income 2,636 - 9,667 1,465 1,734 6,909 1,107 771 6,276 834 380 5,121 845 1,446 4,055 Total trade and other receivables 28,332 22,946 20,544 20,630 20,089 See note 26 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired. See below for the movements in the provision for impairment: At 1 May 2010 Charged for the year Utilised At 30 April 2011 Charged for the year Utilised At 30 April 2012 Charged for the year Utilised At 30 April 2013 Charged for the year Utilised At 30 April 2014 Group £’000 222 92 (237) 77 62 (58) 81 176 (85) 172 331 (154) 349 Concentrations of credit risk with respect to trade receivables are limited due to the Group’s customer base being large, unrelated and blue chip. Due to this, management believe there is no further credit risk provision required in excess of normal provision for doubtful receivables. The average credit period taken on sale of goods or services is 25 days (2013: 24 days, 2012: 22 days, 2011: 26 days, 1 May 2010: 30 days). An impairment review has been undertaken at the balance sheet date to assess whether the carrying amount of ﬁ nancial assets is deemed recoverable. The primary credit risk relates to customers which have amounts due outside of their credit period. A provision for impairment is made when there is objective evidence of impairment which is usually indicated by a delay in the expected cash ﬂ ows or non-payment from customers. 111 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 17. Trade and other receivables (continued) The ageing analysis of trade receivables was as follows: 30 April 2014 30 April 2013 30 April 2012 30 April 2011 1 May 2010 18. Cash and cash equivalents Cash and cash equivalents Bank overdraft Neither past due nor impaired £’000 15,032 12,242 11,779 13,607 12,994 2014 Group £’000 5,360 (85) Past due but not impaired 30-60 days £’000 60-90 days £’000 > 90 days £’000 455 349 374 410 470 190 122 113 109 74 352 125 124 169 205 2013 Group £’000 2,849 (569) 2012 Group £’000 2,231 (81) 2011 Group £’000 156 (5,641) 1 May 2010 Group £’000 320 (8,266) Total cash and cash equivalents 5,275 2,280 2,150 (5,485) (7,946) 19. Trade and other payables Trade creditors Other taxes and social security Other creditors Accruals and deferred income 2014 Group £’000 35,876 4,915 3,265 7,668 2013 Group £’000 24,346 5,233 2,728 5,006 2012 Group £’000 27,907 4,422 2,892 3,520 2011 Group £’000 33,085 3,061 1,879 4,222 1 May 2010 Group £’000 26,114 4,775 1,626 3,423 Total trade and other payables 51,724 37,313 38,741 42,247 35,938 112 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 20. Financial liabilities - Borrowings NON-CURRENT: Bank loans Obligations under ﬁ nance leases or hire purchase agreements CURRENT: Bank overdrafts Bank loans Stocking loans Obligations under ﬁ nance leases or hire purchase agreements 2014 Group £’000 2013 Group £’000 2012 Group £’000 2011 Group £’000 1 May 2010 Group £’000 (216) (32) (4,044) (2,061) (4,260) (2,093) (85) (177) (2,686) (569) (169) (978) - (625) (625) (81) - (474) - - (963) (1,994) (963) (1,994) (5,641) - - (8,266) (1,800) - (2,012) (1,723) (1,987) (1,697) (1,979) (4,960) (3,439) (2,542) (7,338) (12,045) Total external borrowings Add cash and cash equivalents (9,220) 5,360 (5,532) 2,849 (3,167) 2,231 (8,301) 156 (14,039) 320 Net external debt (3,860) (2,683) (936) (8,145) (13,719) Net former parent company balance (14,181) (2,335) (3,480) 3,151 2,826 Net debt (18,041) (5,018) (4,416) (4,994) (10,893) Current ﬁ nancial liabilities: Prior to the reorganisation, the former parent company arranged a proportion of external borrowings used to ﬁ nance the group. Balances were lent to and from the former parent company to fund the group activities. Therefore the amounts owed to and from the former parent company have been disclosed in ﬁ nancial liabilities. Amounts owed to former parent company Amounts owed by former parent company Net former parent company balance Current external ﬁ nancial liabilities 2014 Group £’000 (15,267) 1,086 (14,181) (4,960) 2013 Group £’000 (7,971) 5,636 (2,335) (3,439) 2012 Group £’000 (9,284) 5,804 (3,480) (2,542) 2011 Group £’000 (8,583) 11,734 3,151 7,338 1 May 2010 Group £’000 (2,556) 5,382 2,826 12,845 Current ﬁ nancial liabilities (19,141) (5,774) (6,022) (4,187) (9,219) 113 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 20. Financial liabilities - Borrowings (continued) The maturity analysis of the bank loans at 30 April is as follows: In one year or less Between one and ﬁ ve years After ﬁ ve years Total bank loans 2014 Group £’000 177 216 - 393 2013 Group £’000 169 32 - 201 2012 Group £’000 2011 Group £’000 1 May 2010 Group £’000 - - - - - - - - 1,800 - - 1,800 The amounts which are repayable under hire purchase or ﬁ nance lease instalments are shown below: FIXED RATE LEASES: MINIMUM LEASE PAYMENTS: In one year or less Between one and ﬁ ve years After ﬁ ve years INTEREST: In one year or less Between one and ﬁ ve years After ﬁ ve years PRINCIPAL OF FIXED RATE LEASES: In one year or less Between one and ﬁ ve years After ﬁ ve years VARIABLE RATE LEASES: In one year or less Between one and ﬁ ve years After ﬁ ve years 2014 Group £’000 1,451 2,676 - 2013 Group £’000 978 1,105 - 2012 Group £’000 2011 Group £’000 1 May 2010 Group £’000 891 317 - 1,618 875 - 2,094 2,082 - 4,127 2,083 1,208 2,493 4,176 (192) (182) - (374) 1,259 2,494 - (84) (83) - (167) 894 1,022 - (56) (13) - (69) 835 304 - (219) (109) - (328) 1,399 766 - (327) (247) - (574) 1,767 1,835 - 3,753 1,916 1,139 2,165 3,602 753 1,550 - 829 1,039 - 2,303 1,868 1,151 322 - 1,473 297 197 - 494 212 159 - 371 Total 6,056 3,784 2,612 2,659 3,973 It is the Group’s policy to acquire certain of its property, plant and equipment and inventories under ﬁ nance leases or hire purchase agreements. The average contract term is 3.5 (2013: 3.0, 2012: 3.2, 2011: 3.3, 1 May 2010: 3.4) years. At 30 April 2014 £5,998,000 (2013: £3,712,000, 2012: £2,612,000, 2011: £2,659,000, 1 May 2010, £3,973,000) of the Group total of such obligations are denominated in sterling and the remainder is denominated in Euros. The interest on the variable rate leases is based on a margin above Bank Base Rate, FHBR or LIBOR. The Group’s obligations under ﬁ nance leases are secured by the lessor’s charge over the assets. 114 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 21. Provisions At 1 May 2010 Utilised Charged in period At 30 April 2011 Utilised Charged in period At 30 April 2012 Utilised Charged in period At 30 April 2013 Acquisitions Utilised Charged in period At 30 April 2014 Onerous contracts Uninsured losses Dilapidations 161 (55) - 106 (55) - 51 (51) - - 60 (79) 331 312 21 (60) 389 350 (42) 42 350 (97) 97 350 - (155) (195) - 717 (68) 125 774 (595) 338 517 (160) 348 705 - (264) 93 534 Total 899 (183) 514 1,230 (692) 380 918 (308) 445 1,055 60 (498) 229 846 Provisions have been analysed between current and non-current as follows: Current Non-current 2014 Group £’000 147 699 846 2013 Group £’000 547 508 1,055 2012 Group £’000 428 490 918 2011 Group £’000 636 593 1,230 1 May 2010 Group £’000 130 769 899 Onerous contracts the closure of a depot, the Group has In the year ended 30 April 2011 a provision As part of the consideration for the been unsuccessful in its efforts to sub-let was put in place for legal costs expected acquisition of the German businesses the closed premises. The Directors have to be incurred on behalf of the then parent in 2008 and 2013, the Group took therefore decided to make a provision entity. Any remaining liability has now been on contracts for some staff, vehicles in the current year for the rent that will be indemniﬁ ed by the shareholders of the and premises that were surplus to the payable until the expiry of the lease in former parent company and consequently immediate requirements of the business. September 2018. the balance of the provision has been The onerous element of those contracts released in the year. has been recognised within the fair value of Uninsured losses assets and liabilities acquired. The provisions The uninsured losses provision is in respect Dilapidations were all fully utilised by 30 April 2014. of the cost of claims (generally for Provisions are established over the life of Following a reorganisation of the related) which are either not insured termination under the terms of those leases. commercial vehicles business in the year externally or fall below the excess on the Two key sites have leases that expire 23 and ended 30 April 2013, which included Group’s insurance policies. 14 years from the balance sheet date. commercial vehicles and employment leases to cover remedial work necessary at All other leases expire in 10 years or less. 115 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 22. Share capital ALLOTTED, CALLED UP AND FULLY PAID: 3,852 ‘A’ ordinary shares of £1 each 3,851 ‘B’ ordinary shares of £1 each 100,000,000 ordinary shares of 0.05p each 2014 Company £’000 2013 Company £’000 2012 Company £’000 2011 Company £’000 1 May 2010 Company £’000 - - 50 50 4 4 - 8 4 4 - 8 4 4 - 8 4 4 - 8 On 30 April 2014 the following b) 83,794,000 ordinary shares of 0.05p shareholding in Clipper Logistics GmbH transactions occurred: each were allotted to the then parent (see note 28). The fair value of the shares a) The 3,852 ‘A’ ordinary and 3,851 ‘B’ company for cash consideration of issued was estimated at £800,000 and ordinary shares of £1 each were £42,000. consequently £800,000 was credited to re-designated as 15,406,000 ordinary c) 800,000 ordinary shares of 0.05p each other reserves. shares of 0.05p each. were allotted in exchange for the minority 23. Merger reserve To reﬂ ect the group reorganisation a merger In the year ended 30 April 2014 a charge reserve with a balance of £18,168,000 has of £12,162,000 was made to the reserve been included in the Group Statement of to reﬂ ect the acquisition of the fellow Financial Position at 1 May 2010. subsidiaries from Clipper Group Holdings Ltd as part of the group reorganisation. 24. Commitments and contingencies Operating lease commitments – Land and buildings: Less than one year Between one and ﬁ ve years More than ﬁ ve years 2014 Group £’000 9,660 35,952 57,816 2013 Group £’000 9,137 30,863 61,251 2012 Group £’000 7,445 18,436 15,309 2011 Group £’000 7,684 19,664 18,665 1 May 2010 Group £’000 6,162 17,295 14,960 Total minimum lease payments 103,428 101,251 41,190 46,013 38,417 Operating lease commitments – Plant and machinery: Less than one year Between one and ﬁ ve years More than ﬁ ve years 2014 2014 Group Group £’000 £’000 2,615 3,750 293 2013 2013 Group Group £’000 £’000 3,512 3,479 113 2012 2012 Group Group £’000 £’000 3,446 5,089 71 2011 2011 Group Group £’000 £’000 3,732 4,652 - 1 May 2010 1 May 2010 Group Group £’000 £’000 2,146 1,707 - Total minimum lease payments 6,658 7,104 8,606 8,384 3,853 116 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 25. Capital commitments Authorised and contracted for Authorised, but not contracted for 2014 Group £’000 295 - 295 2013 Group £’000 209 - 209 2012 Group £’000 - 657 657 2011 Group £’000 1 May 2010 Group £’000 - - - - - - 26. Financial instruments and ﬁ nancial risk management objectives and policies In accordance with IAS 39 (Financial At 30 April 2014 there were no signiﬁ cant Liquidity risk Instruments: Recognition and Measurement) concentrations of credit risk (2013: £nil, Management closely monitors available the Group has reviewed all contracts for 2012: £nil, 2011: £nil, 1 May 2010: £nil). bank and other credit facilities in embedded derivatives that are required to The Group’s maximum exposure to credit comparison to the Group’s outstanding be separately accounted for if they do not risk, gross of any collateral held, relating commitments on a regular basis to ensure meet certain requirements. The Group did to its ﬁ nancial assets is equivalent to their that the Group has sufﬁ cient funds to meet not identify any such derivatives. carrying value. All ﬁ nancial assets have a the obligations of the Group as they fall due. fair value which is equal to their carrying The Group is exposed to a number of value. The Group did not have any ﬁ nancial The Board receives regular cash forecasts different market risks in the normal course of instruments that would mitigate the credit which estimate the cash inﬂ ows and business including credit, interest rate and exposure arising from the ﬁ nancial assets outﬂ ows over the next 24-36 months, so that foreign currency risks. designated at fair value through proﬁ t or management can ensure that sufﬁ cient loss in either the current or the preceding ﬁ nancing can be arranged as it is required. Credit risk ﬁ nancial year. Credit risk predominantly arises from trade receivables and cash and cash equivalents. Interest rate risk The Group would normally expect that sufﬁ cient cash is generated in the operating cycle to meet the contractual cash ﬂ ows The Group has a customer credit policy The Group adopts a policy of ensuring that as disclosed above through effective cash in place and the exposure to credit risk is there is an appropriate mix of ﬁ xed and management. monitored on an ongoing basis. External ﬂ oating rates in managing its exposure to credit ratings are generally obtained for changes in interest rates on borrowings. Foreign currency risk customers; Group policy is to assess the Interest rate swaps are entered into, where The Group is exposed to foreign currency credit quality of each customer before necessary, to achieve this appropriate mix. risk on sales, purchases and borrowings that accepting any terms of trade. Interest rate sensitivity are denominated in currencies other than Pounds Sterling. The currencies giving rise to Internal procedures take into account The Group’s borrowings are largely this risk are primarily the Euro and US dollar. the customers’ ﬁ nancial position as well denominated in Pounds Sterling and the The volume of transactions denominated as their reputation within the industry and Group is therefore exposed to a change in foreign currencies is not signiﬁ cant to the past payment experience. Cash and in the relevant interest rate. With all other Group. cash equivalents and derivative ﬁ nancial variables held constant, the impact of a instruments are held with AAA or AA rated reasonably possible increase in interest The exposure to a short-term ﬂ uctuation in banks. Financial instruments classiﬁ ed as fair rates of 50 basis points on that portion of exchange rates on the investment in foreign value through proﬁ t and loss and available borrowings affected, would be to reduce subsidiaries is not expected to have a for sale are all publicly traded on the UK the Group’s proﬁ t before tax by £23,000 material impact on the results of the Group. London Stock Exchange. Given the high (2013: £15,000, 2012: £7,000, 2011: credit quality of counterparties with whom £30,000, 1 May 2010: £52,000). the Group has investments, the Directors do not expect any counterparty to fail to meet its obligations. 117 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 26. Financial instruments and ﬁ nancial risk management objectives and policies (continued) Capital management The Group considers its capital to include Estimation of fair values The Group’s main objective when managing equity and net debt as noted below. The main methods and assumptions used capital is to protect returns to shareholders Net debt includes short and long-term in estimating the fair values of ﬁ nancial by ensuring the Group will continue to trade borrowings (including overdrafts and instruments are as follows: proﬁ tably in the foreseeable future. lease obligations) net of cash and - derivatives: forward exchange contracts The Group also aims to maximise its capital cash equivalents. are marked to market using listed market structure of debt and equity so as to prices; minimise its cost of capital. The Group has not made any changes to - interest-bearing loans and borrowings: fair its capital management during the year. value is calculated based on discounted The Group manages its capital with regard The Group has no long-term gearing ratio expected future principal and interest to the risks inherent in the business and the target. Borrowings are taken out to invest cash ﬂ ows; and sector within which it operates by monitoring in new sites or depots and are considered - trade and other receivables/payables: its gearing ratio on a regular basis and as part of that investment appraisal. Key the notional amount for trade receivables/ adjusting the level of dividends paid to measures monitored by the Group are payables with a remaining life of less than ordinary shareholders. interest cover and net debt compared to one year are deemed to reﬂ ect their earnings before interest, tax, depreciation fair value. and amortisation. The book and fair values of the Group’s ﬁ nancial instruments were as follows: CURRENT FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables LIABILITIES Bank overdraft Short term borrowings Trade and other payables Long term borrowings CURRENT FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables LIABILITIES Bank overdraft Short term borrowings Trade and other payables Long term borrowings 2014 Book value £’000 2014 Fair value £’000 2013 Book value £’000 2013 Fair value £’000 5,360 28,332 (85) (19,056) (51,724) (4,260) 5,360 28,332 (85) (19,056) (51,724) (4,103) 2,849 22,946 (569) (5,205) (37,313) (2,093) 2,849 22,946 (569) (5,205) (37,313) (2,045) 2012 Book value £’000 2012 Fair value £’000 2011 Book value £’000 2011 Fair value £’000 1 May 2010 Book value £’000 1 May 2010 Fair value £’000 2,231 20,544 2,231 20,544 156 20,630 156 20,630 320 20,089 320 20,089 (81) (5,941) (38,741) (625) (81) (5,941) (38,741) (614) (5,641) 1,454 (42,247) (963) (5,641) 1,454 (42,247) (890) (8,266) (953) (35,938) (1,994) (8,266) (953) (35,938) (1,925) Long-term borrowings are classiﬁ ed as Level 2 (items with signiﬁ cant observable inputs) ﬁ nancial liabilities under IFRS 13. There have been no transfers between Level 1 and Level 2 ﬁ nancial instruments during the period. 118 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 26. Financial instruments and ﬁ nancial risk management objectives and policies (continued) Maturity of ﬁ nancial liabilities: Due within one year Due between one and two years Due between two and ﬁ ve years 1 May 2010 30 April 2011 30 April 2012 30 April 2013 30 April 2014 Fixed Floating Total Fixed Floating Total Fixed Floating Total Fixed Floating Total Fixed Floating Total 1,767 10,278 12,045 1,399 5,939 7,338 836 5,186 6,022 1,063 4,711 5,774 1,436 17,705 19,141 1,399 149 1,548 620 158 778 269 211 480 550 361 911 1,242 978 2,220 436 10 446 146 39 185 34 111 145 503 679 1,182 1,469 571 2,040 Total 3,602 10,437 14,039 2,165 6,136 8,301 1,139 5,508 6,647 2,116 5,751 7,867 4,147 19,254 23,401 119 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 27. Related party disclosures At the previous year end, Steve Parkin and bore interest at 3.25% per annum. and Sean Fahey, both Directors, jointly The rental agreement terminated on had an unpaid loan account in favour of 30 May 2014. the Company. The loan was not interest bearing and was repaid to the Company During the year the Company leased in April 2014. racehorses which are beneﬁ cially owned by Steve Parkin. These horses ran in the Additionally Steve Parkin had an individual Company name and in Company loan account in favour of the Company. colours. Under the terms of the lease, the The loan was not interest bearing and was Company is responsible for all expenditure repaid to the Company in April 2014. in connection with the horses but can retain any monies received for a win or placing At the previous year end, Tony Mannix, a up to the value of the costs incurred for that Director, had an unpaid loan account in horse. The rights and liabilities arising under favour of the Company. The loan was not this arrangement ceased on 31 May 2014. interest bearing and was repaid to the Company in April 2014. Roydhouse Properties Ltd is the landlord of two of the Company’s leasehold properties At the previous year end, Mike Badrock, and is classed as a related party due to the a Non-Executive Director, had an unpaid company having common directors with loan account in favour of the Company. Clipper Logistics plc. The loan was not interest bearing and was repaid to the Company in April 2014. Guiseley Association Football Club shares a common director with Clipper Logistics plc. At the previous year end the Company had advanced a loan to Harrogate Road Balances due to and from the former Restaurants Ltd, a related party of the parent company can be found in note 20. Group as it shares certain shareholders and Interest receivable and payable from the directors in common with the Company. former parent company can be found in The loan was not interest bearing and was notes 9 and 10. repaid to the Company in April 2014. The dividends paid to the former parent The Group rented an aircraft from South company can be found in note 8. Acre Aviation Ltd, a company owned by Steve Parkin. Charges are on an arm’s Key management compensation is length basis and the Group had advanced disclosed in note 5. a loan to South Acre Aviation Ltd. The loan was repaid to the Company in April 2014 120 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 27. Related party disclosures (continued) STATEMENT OF FINANCIAL POSITION: Loan to SN Parkin & SE Fahey – closing Loan to SN Parkin & SE Fahey – maximum balance in the year 2014 2014 Group Group £’000 £’000 - 83 Loan to SN Parkin – closing Loan to SN Parkin – maximum balance in the year - 1,653 Loan to A G Mannix – closing Loan to A G Mannix – maximum balance in the year Loan to M D Badrock – closing Loan to M D Badrock – maximum balance in the year Loan to South Acre Aviation Ltd – interest bearing Loan to Harrogate Road Restaurants Ltd – closing INCOME STATEMENT: South Acre Aviation Ltd – aircraft rental costs Horse Costs Roydhouse Properties Ltd – rent payable Guiseley Association Football Club – advertising and sponsorship - 12 - 496 - - 69 414 819 275 2013 2013 Group Group £’000 £’000 83 83 1,536 1,536 12 12 103 103 42 54 52 83 781 210 2012 2012 Group Group £’000 £’000 2011 2011 Group Group £’000 £’000 1 May 2010 1 May 2010 Group Group £’000 £’000 46 46 713 913 12 12 - - 42 - 20 211 - 280 15 911 353 737 12 41 - - 42 - - 174 - 140 760 760 637 645 41 41 - - - - - 218 - 87 121 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 28. Business combinations a) R. Geist Spedition GmbH & Co. KG The Group acquired Geist to increase its On 1 October 2013, the Group acquired presence in mainland Europe and therefore 100% of the voting shares of R. Geist assist the Group’s UK customers with their Spedition GmbH & Co. KG (“Geist”), expansion plans. an unlisted company based in Germany and specialising in value-added logistics services, in exchange for cash consideration. Purchase consideration: Cash paid Total consideration Analysis of cash ﬂ ows on acquisition: Net cash acquired with the subsidiary (included in cash ﬂ ows from investing activities) Net cash ﬂ ow on acquisition Acquisition: ASSETS Property, plant and equipment Cash and cash equivalents Inventories Trade receivables Other receivables LIABILITIES Trade payables Other payables Bank loans Current tax liability Deferred tax liability Total identiﬁ able net assets (liabilities) at fair value Goodwill arising on acquisition Total consideration 122 £’000 224 224 (160) (64) Fair value recognised on acquisition £’000 127 160 49 841 48 418 475 317 24 - (9) 233 224 Strategic Report | Governance | Financial Statements Notes to the Group Financial Statements continued 28. Business combinations (continued) a) R. Geist Spedition GmbH & Co. KG Due to the contractual terms imposed With effect from 1 March 2014 the Geist (continued) on acquisition, the customer list is not business was merged with Clipper Logistics The fair value of the trade receivables separable. Therefore, it does not meet the GmbH. The combined entity now trades as amounts to £841,000. The gross amount criteria for recognition as an intangible Clipper Geist Logistics GmbH & Co. KG. of trade receivables is £878,000. asset under IAS 38. None of the goodwill An impairment provision of £37,000 has recognised is expected to be deductible for b) Clipper Logistics GmbH been made. income tax purposes. On 16 April 2014, the Company acquired, at book value, the former parent The goodwill of £233,000 comprises the From the date of acquisition, Geist has company’s 75% shareholding in Clipper value of expected synergies arising from the contributed £4,190,000 of revenue and Logistics GmbH. acquisition and a customer list, which is not £209,000 to the proﬁ t before tax from separately recognised. Goodwill is allocated continuing operations of the Group. If On 30 April 2014 the Company acquired entirely to the value-added logistics the combination had taken place at the remaining 25% from the minority services segment. the beginning of the year, revenue from shareholders, in exchange for the allotment continuing operations would have been of 800,000 ordinary shares of 0.05p each. £204,193,000 and the proﬁ t before tax from As this is an increase in the Company’s continuing operations for the Group would ownership interest that does not result in a have been £3,986,000. change of control, this is accounted for as an equity transaction through other reserves. Acquisition of minority shareholding in Clipper Logistics GmbH Fair value of shares issued Book value of non-controlling interests acquired Difference accounted for through equity c) Stormont Truck and Van Ltd On 10 August 2013, Northern Commercials (Mirﬁ eld) Ltd paid £1,958,000 to Clipper Group Holdings Ltd to acquire 100% of the issued share capital of Stormont Truck and Van Ltd. The trade and assets of Stormont Truck and Van Ltd were subsequently hived up into Northern Commercials (Mirﬁ eld) Ltd. £’000 800 (33) 767 123 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Group Financial Statements continued 29. First time adoption of IFRS 30. Post balance sheet events Although as explained in more detail in Ultimate parent company note 2.1, the Group’s deemed date of At 30 April 2014, the Company’s ultimate transition to IFRS is 1 May 2010, these parent company was Clipper Group Financial Statements are the ﬁ rst prepared Holdings Ltd. Following the partial sale in by the Group under IFRS. Note 2.1 also the Initial Public Offering and admission to explains that while comparative ﬁ gures trading on the London Stock Exchange on have been prepared as though the Group 4 June 2014, Clipper Group Holdings Ltd existed, the Group did not legally form until ceased to be the ultimate parent company. 16 April 2014. The reconciliations required under paragraph 24 of IFRS 1 in the ﬁ rst Bank borrowings ﬁ nancial statements of an entity adopting On 2 May 2014, the existing bank facilities IFRS have therefore not been produced, on of Clipper Group Holdings Ltd were novated the grounds that there are no previous UK to the Company. Upon Admission on 4 June GAAP ﬁ nancial statements for the Group as 2014, the Group was granted replacement currently constituted. bank facilities totalling £30,000,000 by Santander Corporate UK and settled all amounts then outstanding by members of the Group to Clipper Group Holdings Ltd. 124 125 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Annual Report and Accounts 2014 Company Financial Statements for the year ended 30 April 2014 126 126 127 Clipper Logistics plc Annual Report and Accounts 2014 Statement of Directors’ Responsibilities in respect of the Annual Report and the Company Financial Statements The Directors are responsible for preparing In preparing those Financial Statements the the Annual Report and the Financial Directors are required to: Statements in accordance with applicable - Select suitable accounting policies and laws and regulations. apply them consistently, - Make judgements and estimates that are Company law requires the Directors to reasonable and prudent prepare ﬁ nancial statements for each - State whether applicable UK Accounting ﬁ nancial year. Under that law the Directors Standards have been followed, subject have elected to prepare the Financial to any material departures disclosed and Statements in accordance with United explained in the Financial Statements, Kingdom Generally Accepted Accounting and Practice (United Kingdom Accounting - Prepare the Financial Statements on Standards and applicable law). Under the going concern basis unless it is company law the Directors must not inappropriate to presume that the approve the ﬁ nancial statements unless Company will continue as a going they are satisﬁ ed that they give a true concern. and fair view of the state of affairs of the Company and the proﬁ t or loss for The Directors are responsible for keeping adequate accounting records that are sufﬁ cient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the ﬁ nancial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. that period. 128 Strategic Report | Governance | Financial Statements Independent Auditor’s Report - Company Independent auditor’s report to the members of Clipper Logistics plc We have audited the Company Financial Scope of the audit of the Financial Companies Act 2006; and Statements of Clipper Logistics plc for Statements - the information given in the Strategic the year ended 30 April 2014 which An audit involves obtaining evidence about Report and the Directors’ Report for the comprise the Company Balance Sheet the amounts and disclosures in the Financial ﬁ nancial year for which the Financial and the related notes A to Q. The ﬁ nancial Statements sufﬁ cient to give reasonable Statements are prepared is consistent with reporting framework that has been assurance that the Financial Statements are the Company Financial Statements. applied in their preparation is applicable free from material misstatement, whether law and United Kingdom Accounting caused by fraud or error. This includes an Standards (United Kingdom Generally assessment of: whether the accounting Matters on which we are required to report Accepted Accounting Practice). policies are appropriate to the Company’s by exception This report is made solely to the circumstances and have been consistently We have nothing to report in respect of the Company’s members, as a body, in applied and adequately disclosed; the following matters where the Companies Act accordance with Chapter 3 of Part 16 of reasonableness of signiﬁ cant accounting 2006 requires us to report to you if, in our the Companies Act 2006. Our audit work estimates made by the Directors; and opinion: has been undertaken so that we might the overall presentation of the Financial - adequate accounting records have not state to the Company’s members those Statements. In addition, we read all the been kept by the Company, or returns matters we are required to state to them ﬁ nancial and non-ﬁ nancial information adequate for our audit have not been in an auditor’s report and for no other in the Annual Report to identify material received from branches not visited by us; purpose. To the fullest extent permitted inconsistencies with the audited Financial or by law, we do not accept or assume Statements and to identify any information - the Company Financial Statements and responsibility to anyone other than the that is apparently materially incorrect based the part of the Directors’ Remuneration Company and the Company’s members on, or materially inconsistent with, the Report to be audited are not in as a body, for our audit work, for this knowledge acquired by us in the course of agreement with the accounting records report, or for the opinions we have formed. performing the audit. If we become aware and returns; or of any apparent material misstatements or - certain disclosures of directors’ inconsistencies we consider the implications remuneration speciﬁ ed by law are not Respective responsibilities of Directors for our report. made; or and auditor As explained more fully in the Statement of - we have not received all the information and explanations we require for our audit. Directors’ Responsibilities set out on page Opinion on the Financial Statements 128, the Directors are responsible for the In our opinion the Company Financial preparation of the Company Financial Statements: Other matters Statements and for being satisﬁ ed that they - give a true and fair view of the state of the We have reported separately on the Group give a true and fair view. Our responsibility Company’s affairs as at 30 April 2014; Financial Statements of Clipper Logistics plc is to audit and express an opinion on - have been properly prepared in for the year ended 30 April 2014. the Company Financial Statements in accordance with United Kingdom accordance with applicable law and Generally Accepted Accounting Practice; The risks disclosed in the Group audit report International Standards on Auditing (UK and in respect of revenue recognition, and the and Ireland). Those standards require us to - have been prepared in accordance classiﬁ cation of certain head ofﬁ ce costs comply with the Auditing Practices Board’s with the requirements of the Companies as discontinuing costs, also apply to the Ethical Standards for Auditors. Act 2006. Company Financial Statements. Opinion on other matters prescribed by for and on behalf of Ernst & Young LLP, the Companies Act 2006 Statutory Auditor Stuart Watson (Senior statutory auditor) In our opinion: - the part of the Directors’ Remuneration Leeds Report to be audited has been properly 28 August 2014 prepared in accordance with the 129 Clipper Logistics plc Annual Report and Accounts 2014 Company Balance Sheet At 30 April FIXED ASSETS Tangible assets Investment in subsidiaries Intangible assets Total ﬁ xed assets CURRENT ASSETS Stock Debtors Cash at bank and in hand Total current assets Creditors: amounts falling due within one year Net current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges NET ASSETS EQUITY SHAREHOLDERS’ FUNDS Share capital Share premium Other reserve Proﬁ t and loss account TOTAL EQUITY Note B C D E F G H I K L L M 2014 £’000 12,026 11,286 5,778 29,090 543 16,743 3,302 20,588 42,240 2013 £’000 11,905 282 6,193 18,380 295 14,566 14 14,875 18,271 (21,652) (3,396) 2,438 902 4,098 50 48 851 3,149 4,098 9,086 1,101 4,797 8 48 51 4,690 4,797 Approved by the Board on 28 August 2014 and signed on its behalf by: D A Hodkin – Chief Financial Ofﬁ cer 130 Strategic Report | Governance | Financial Statements Notes to the Company Balance Sheet A. Accounting policies Basis of accounting The Directors have assessed the future The Financial Statements are prepared funding requirements of the Group and The Financial Statements have been under the historical cost convention. the Company and compared them to the prepared in accordance with the bank facilities which are now available. Companies Act 2006 and with The Financial Statements have been The assessment included a detailed review applicable accounting standards prepared on a going concern basis. In of ﬁ nancial and cash ﬂ ow forecasts for at in the United Kingdom. determining the appropriate basis of least the 12 month period from the date preparation of the Financial Statements, the of signing the Annual Report. The Directors Directors are required to consider whether considered a range of potential scenarios Basis of preparation the Group can continue in operational within the key markets the Group serves and The Company Financial Statements for the existence for the foreseeable future. how these might impact on the Group’s year ended 30 April 2014 were authorised for cash ﬂ ow. The Directors also considered issue by the Board of Directors on 28 August Further information in relation to the Group’s what mitigating actions the Group could 2014 and the Company Statement of business activities, together with the factors take to limit any adverse consequences. Financial Position was signed on the Board’s likely to affect its future development, The Group’s forecasts and projections show behalf by David Hodkin. performance and position is set out in the that the Group should be able to operate A summary of the principal Company pages 4 to 29. in borrowing facilities. Strategic Report section of this report on without the need for any increase accounting policies is set out below. These have been applied on a consistent basis Note 26 to the Group Financial Statements Having undertaken this work, the Directors unless otherwise indicated. includes the Group’s objectives, policies are of the opinion that the Company and processes for managing its capital, its and the Group have adequate resources Clipper Logistics plc (the “Company”), ﬁ nancial risk management objectives and to continue in operational existence for a public limited company incorporated its exposure to foreign exchange, credit and the foreseeable future. Accordingly, they and domiciled in the United Kingdom, interest rate risk. acts as parent undertaking for the continue to adopt the going concern basis in preparing the Financial Statements. Clipper group of companies. The Company Balance Sheet at 30 April 2014 shows net current liabilities of As permitted by section 408 of the £21,652,000 (2013: £3,396,000). On 2 Tangible ﬁ xed assets Companies Act 2006, the Company May 2014 the bank facilities granted by The cost of tangible ﬁ xed assets is their has not presented its own proﬁ t and loss Santander UK plc to Clipper Group Holdings purchase cost, together with any incidental account. The proﬁ t after tax for the year was Ltd were novated to the Company. On 4 expenses of acquisition. £784,000 (2013: £2,866,000). There were June 2014 these facilities were restructured no other recognised gains or losses in either and extended. Following the restructuring, Depreciation is calculated so as to write off year. Audit fees are disclosed in note 6 to in addition to a ﬁ ve year term loan of the cost of tangible ﬁ xed assets, less their the Group Financial Statements. £12,500,000 amortising quarterly, the Group estimated residual value, on a straight line or has access to a ﬁ ve year, non-amortising, reducing balance basis over their estimated The Company has taken advantage of the revolving credit facility of £12,504,000. economic lives. The estimated economic exemptions in FRS 1 from preparing cash ﬂ ows as the Group’s consolidated Financial Statements, in which the Company is included, provide equivalent disclosures. The Company has taken advantage of the exemption in FRS 8 not to disclose related party transactions with Group companies. lives used for the separate categories of ﬁ xed assets for this purpose are: - Leasehold property - 5 to 15 years - Plant and machinery - 2 to 10 years - Motor vehicles - 4 to 8 years 131 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Company Balance Sheet continued Investments in subsidiary undertakings Stocks Post-retirement beneﬁ ts Fixed asset investments are shown at cost Stocks are valued at the lower of cost and The Company provides no other post- less provision for impairment. net realisable value on a line by line basis. retirement beneﬁ ts to its employees. Provision is made for obsolete and slow- moving items. Purchased goodwill Goodwill representing the excess of the purchase price compared with the fair Taxation Foreign currencies Assets and liabilities expressed in foreign currencies are translated into sterling at value of net assets acquired is capitalised The charge for taxation is based on the rates of exchange ruling at the balance and written off over its estimated useful life result for the year. Deferred tax is provided sheet date or at the agreed contractual of 20 years, unless the Directors consider in full on timing differences that result in an rate. Transactions in foreign currency are that a shorter period is more appropriate. obligation at the balance sheet date to translated at the rate ruling at the date of pay more tax, or a right to pay less tax, at the transaction. All differences on exchange a future date at rates expected to apply are taken to the proﬁ t and loss account. Lease assets and obligations when they crystallise, based on current tax Leasing agreements and hire purchase rates and laws. Deferred tax is not provided contracts which transfer to the Company on timing differences arising from the Share based payments substantially all the beneﬁ ts and risks of revaluation of ﬁ xed assets where there is no The former parent company issued ownership of an asset (“ﬁ nance leases”) are binding contract to dispose of these assets. equity-settled share based payments to treated as if the asset had been purchased Deferred tax assets are only recognised certain employees. The fair value at the outright. Assets held under such agreements to the extent that it is regarded as more date of grant of the equity-settled share are included in ﬁ xed assets and the capital likely than not that they will be recovered. based payments is expensed on a element of commitments is shown as Deferred tax assets and liabilities recognised straight-line basis over the vesting period obligations under ﬁ nance leases. Payments have not been discounted. based on the former parent company’s estimate of shares that will eventually vest. under such agreements are treated as consisting of capital and interest elements. The interest element is charged to the proﬁ t Pensions and loss account over the primary lease Contributions are made to the personal period in proportion to the reducing capital pension plans of certain employees. element outstanding. Assets held under The assets of the scheme are held ﬁ nance leases are depreciated over the separately from those of the Company. shorter of the lease terms and the useful The expenditure is charged to the proﬁ t lives of equivalent owned assets. and loss account as incurred. All other leases are treated as operating leases, the costs of which are charged on a straight line basis over the lease term. Lease incentives are recognised over the shorter of the lease term and the date of the next rent review. 132 Strategic Report | Governance | Financial Statements Notes to the Company Balance Sheet continued B. Tangible ﬁ xed assets COST At 1 May 2013 Additions Intra-group transfers Disposals Leasehold property £’000 Motor vehicles £’000 Plant, machinery, ﬁ xtures & ﬁ ttings £’000 Total £’000 2,088 1,294 21,541 24,923 503 97 (58) 145 - (115) 2,279 11 (154) 2,927 108 (327) At 30 April 2014 2,630 1,324 23,677 27,631 ACCUMULATED DEPRECIATION At 1 May 2013 Charge for the year Disposals At 30 April 2014 NET BOOK VALUE At 30 April 2013 At 30 April 2014 795 162 (58) 899 1,293 1,731 1,014 11,209 13,018 130 (114) 2,621 (154) 2,913 (326) 1,030 13,676 15,605 280 294 10,332 10,001 11,905 12,026 Included within tangible ﬁ xed assets are amounts held under ﬁ nance lease contracts. At 30 April 2014 the net book value of these assets was £3,560,000 (30 April 2013: £1,120,000).The depreciation charged to the accounts in the year in respect of such assets amounted to £1,612,000 (2013: £618,000). 133 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Company Balance Sheet continued C. Investment in subsidiary undertakings COST At 1 May Additions At 30 April PROVISION FOR IMPAIRMENT 2014 £’000 497 11,004 11,501 2013 £’000 497 - 497 At 1 May 2013 and 30 April 2014 215 215 NET BOOK VALUE At 30 April 2014 11,286 282 On 16 April 2014 the Company acquired from Clipper Group Holdings Ltd, at book value, its entire investment in the other members of the Group, which included 75% of Clipper Geist Logistics GmbH & Co. KG (see note 2.1 to the Group Financial Statements). On 30 April 2014 the Company acquired the remaining 25% of Clipper Geist Logistics GmbH & Co. KG in exchange for the issue of 800,000 ordinary shares (see note 28 to the Group Financial Statements). Subsidiary undertakings Except where indicated, the subsidiary undertakings are incorporated and operate in Great Britain, registered in England and Wales and the Company or Group owns 100% of the issued ordinary share capital. The subsidiary undertakings of the Company are as follows: Company Nature of business during the year Clipper Geist Logistics GmbH & Co. KG (Germany) Contract distribution & warehousing Northern Commercials (Mirﬁ eld) Ltd Distribution of commercial vehicles Stormont Truck and Van Ltd Distribution of commercial vehicles Genesis Specialised Product Packing Ltd On-line retail and distribution Gagewell Transport Ltd Clipper e-commerce Ltd Clipper Logistics (Processing) Ltd Clipper Logistics (Warehousing) Ltd Clipper Secure Logistics Ltd DTS Logistics Ltd Guardex Security Services Ltd Transference Technology Ltd (90% owned)* Northern Commercial Trailers (Mirﬁ eld) Ltd* * shareholding held indirectly Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant 134 Strategic Report | Governance | Financial Statements Notes to the Company Balance Sheet continued D. Intangible assets COST: Goodwill £’000 Contracts and Licenses £’000 Total £’000 At 1 May 2013 and 30 April 2014 8,312 723 9,035 ACCUMULATED AMORTISATION: At 1 May 2013 Charge for the year At 30 April 2014 NET BOOK VALUE: At 30 April 2013 At 30 April 2014 E. Stocks Component parts and consumable stores Total inventories 2,119 415 2,534 6,193 5,778 723 - 723 - - 2014 £’000 543 543 2,842 415 3,257 6,193 5,778 2013 £’000 295 295 135 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Company Balance Sheet continued F. Debtors Trade debtors Corporation tax Other debtors Director loan accounts (see note P) Prepayments and accrued income Amounts owed by fellow Group companies Amounts owed by former parent company 2014 £’000 6,412 121 146 - 8,232 1,832 - 2013 £’000 4,996 - 310 1,734 5,245 2,079 202 Total debtors 16,743 14,566 G. Creditors: amounts falling due within one year Bank overdrafts Bank loans Obligations under ﬁ nance leases or hire purchase agreements Trade creditors Other taxes and social security Other creditors Corporation tax payable Accruals and deferred income Amounts owed to fellow Group companies Amounts owed to former parent company 2014 £’000 85 86 1,164 13,999 3,667 1,021 - 6,600 351 15,267 2013 £’000 357 169 397 9,066 2,823 679 486 4,257 37 - Total creditors: amounts falling due within one year 42,240 18,271 H. Creditors: amounts falling due after more than one year Amounts owed to fellow Group companies Amounts owed to former parent company Bank loans Obligations under ﬁ nance leases or hire purchase agreements Total creditors: amounts falling due after more than one year 2014 £’000 - - 40 2,398 2013 £’000 283 8,173 32 598 2,438 9,086 Obligations under ﬁ nance leases and hire purchase contracts are secured by related assets. 136 Strategic Report | Governance | Financial Statements Notes to the Company Balance Sheet continued I. Provisions for liabilities and charges At 1 May 2013 Utilised (Credited) / charged in period At 30 April 2014 Other provisions Deferred taxation Other provisions 635 - (204) 431 466 (89) 94 471 Total 1,101 (89) (110) 902 Provisions are established over the life of leases to cover remedial work necessary at termination under the terms of those leases. Two key sites have leases that expire 23 and 14 years from the balance sheet date. All other leases expire in 10 years or less. J. Deferred tax Deferred tax liability: Accelerated capital allowances Deferred tax asset: Provisions & other timing differences Net deferred tax liability 2014 £’000 (444) 13 (431) 2013 £’000 (661) 26 (635) The UK corporation tax rate reduced from 23% to 21% with effect from 1 April 2014. A further reduction to 20% is effective from 1 April 2015. Accordingly, these rates have been applied in the measurement of the Company’s deferred tax assets and liabilities as at 30 April 2014. 137 Clipper Logistics plc Annual Report and Accounts 2014 Notes to the Company Balance Sheet continued K. Share capital ALLOTTED, CALLED UP AND FULLY PAID: 3,852 ‘A’ ordinary shares of £1 each 3,851 ‘B’ ordinary shares of £1 each 100,000,000 ordinary shares of 0.05p each 2014 £’000 2013 £’000 - - 50 50 4 4 - 8 On 30 April 2014 the following transactions occurred: a) The 3,852 ‘A’ ordinary and 3,851 ‘B’ ordinary shares of £1 each were re-designated as 15,406,000 ordinary shares of 0.05p each. b) 83,794,000 ordinary shares of 0.05p each were allotted to the then parent company for cash consideration of £42,000 c) 800,000 ordinary shares of 0.05p each were allotted in exchange for the minority shareholding in Clipper Logistics GmbH (see note 28 to the Group Financial Statements). The fair value of the shares issued was estimated at £800,000 and consequently £800,000 was credited to reserves. L. Reserves Share premium account £’000 48 - 48 2014 £’000 4,690 784 (2,500) 175 3,149 Other reserve £’000 51 800 851 2013 £’000 4,587 2,866 (2,800) 37 4,690 At 1 May 2012 and 30 April 2013 Arising on acquisition of minority interest At 30 April 2014 M. Proﬁ t and loss account At 1 May Proﬁ t for the ﬁ nancial year Dividends Share based payments* At 30 April *See note 12 to the Group Financial Statements 138 Strategic Report | Governance | Financial Statements Notes to the Company Balance Sheet continued N. Commitments and contingencies The Company has annual commitments under non-cancellable operating leases as follows: Operating lease commitments – Land and buildings: Operating leases which expire: - Within one year - Between one and ﬁ ve years - More than ﬁ ve years Operating lease commitments – Plant and machinery: Operating leases which expire: - Within one year - Between one and ﬁ ve years - More than ﬁ ve years O. Capital commitments Authorised and contracted for Authorised, but not contracted for 2014 £’000 509 1,905 4,964 7,378 2014 £’000 582 1,358 215 2,155 2014 £’000 295 - 295 2013 £’000 830 1,141 5,019 6,990 2013 £’000 213 2,024 96 2,333 2013 £’000 209 - 209 139 Clipper Logistics plc Annual Report and Accounts 2014 Strategic Report | Governance | Financial Statements Notes to the Company Balance Sheet continued P. Related party disclosures At the previous year end, 30 April 2013, Harrogate Road Restaurants Ltd is a related Guiseley A. F. C. Ltd shares a common Steve Parkin and Sean Fahey, both Directors, party of the Group as it shares certain director with Clipper Logistics plc. Advertising jointly had an unpaid loan account in shareholders and directors in common and sponsorship payable by the Company favour of the Company in the sum of with Clipper Logistics plc. At 30 April 2013 to Guiseley A. F. C. Ltd in the year ended 30 £83,000. This was the maximum balance the Company had advanced a loan of April 2014 amounted to £275,000 (2013: outstanding and the loan was not interest £54,000 to Harrogate Road Restaurants Ltd. £210,000). This advertising and sponsorship bearing. The loan was repaid to the The loan was not interest bearing and was ceased at the end of the 2013/14 football Company in April 2014. repaid to the Company in April 2014. season. Additionally Steve Parkin had an individual Balances due to the former parent loan account outstanding at 30 April 2013 The Company rents an aircraft from South company can be found in note H. in the sum of £1,536,000. The maximum Acre Aviation Ltd, a company owned by balance outstanding in the year ended 30 Steve Parkin. Charges are on an arm’s Interest payable to the former parent April 2014 was £1,653,000 and the loan was length basis and in the year ended 30 company during the year ended 30 April not interest bearing. The loan was repaid to April 2014 amounted to £69,000 (2013: 2014 was £298,000 (2013: £310,000). the Company in April 2014. £52,000). At the commencement of this At the previous year end, 30 April 2013, a loan in the sum of £42,000 to South company can be found in note 8 to the Tony Mannix, a Director, had an unpaid Acre Aviation Ltd, which was repaid in April Group Financial Statements. arrangement the Company also advanced The dividends paid to the former parent loan account in favour of the Company in 2014. The loan carried interest at 3.25% per the sum of £12,000. This was the maximum annum. The rental agreement terminated balance outstanding and the loan was not on 30 May 2014. interest bearing. The loan was repaid to the Q Post balance sheet events Ultimate parent company Company in April 2014. During the year the Company leased At 30 April 2014, the Company’s ultimate racehorses which are beneﬁ cially owned parent company was Clipper Group At the previous year end, 30 April 2013, by Steve Parkin. These horses ran in the Holdings Ltd. Following the partial sale in Mike Badrock, a Non-Executive Director, Company name and in Company the Initial Public Offering and admission to had an unpaid loan account in favour of colours. Under the terms of the lease, the trading on the London Stock Exchange on the Company in the sum of £103,000. The Company is responsible for all expenditure 4 June 2014, Clipper Group Holdings Ltd maximum balance outstanding in the year in connection with the horses but can retain ceased to be the ultimate parent company. ended 30 April 2014 was £496,000 and the any monies received for a win or placing loan was not interest bearing. The loan was up to the value of the costs incurred for that Bank borrowings repaid to the Company in April 2014. horse. The total net costs charged to the On 2 May 2014, the existing bank facilities income statement in the year ended 30 of Clipper Group Holdings Ltd were novated April 2014 amounted to £414,000 (2013: to the Company. Upon Admission on 4 June £83,000). The rights and liabilities arising 2014, the Group was granted replacement under this arrangement ceased on bank facilities totalling £30,000,000 by 31 May 2014. Santander Corporate UK and settled all amounts then outstanding by members of Roydhouse Properties Ltd is the landlord of the Group to Clipper Group Holdings Ltd. two of the Company’s leasehold properties and is classed as a related party due to the company having common directors with Clipper Logistics plc. Rents paid to Roydhouse Properties Ltd in the year ended 30 April 2014 were £819,000 (2013: £781,000). 140 Strategic Report | Governance | Financial Statements Directors, Secretary, registered and head ofﬁ ce and advisors Directors: Company Secretary: Registered Ofﬁ ce and Head Ofﬁ ce of the Company: Registered number: Sponsor, ﬁ nancial advisor, sole bookrunner and broker: Legal advisors: Reporting accountant and auditors: Registrars: Financial public relations advisors to the Company: Steve Parkin, Executive Chairman Tony Mannix, Chief Executive Ofﬁ cer David Hodkin, Chief Financial Ofﬁ cer Sean Fahey, Chief Information Ofﬁ cer Paul Hampden Smith, Senior Independent Non-Executive Director Mike Russell, Independent Non-Executive Director Stephen Robertson, Independent Non-Executive Director Ron Series, Independent Non-Executive Director Paul White Gelderd Road Leeds LS12 6LT 03042024 Numis Securities Ltd The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT DWF LLP Bridgewater Place Water Lane Leeds LS11 5DY Ernst & Young LLP 1 Bridgewater Place Water Lane Leeds LS11 5QR Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA Bell Pottinger Holborn Gate 330 High Holborn London WC1V 7QD 141 Clipper Logistics plc Annual Report and Accounts 2014 142 143 Clipper Logistics plc Annual Report and Accounts 2014 Clipper Logistics plc Gelderd Road Leeds LS12 6LT 0113 204 2050 Tel: Email: info@clippergroup.co.uk Web: www.clippergroup.co.uk 144

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